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1 Before the Federal Communications Commission Washington, D.C In the Matter of Protecting and Promoting the Open Internet ) ) ) ) GN Docket No REPORT AND ORDER ON REMAND, DECLARATORY RULING, AND ORDER Adopted: February 26, 2015 Released: March 12, 2015 By the Commission: Chairman Wheeler and Commissioners Clyburn and Rosenworcel issuing separate statements; Commissioners Pai and O Rielly dissenting and issuing separate statements. TABLE OF CONTENTS I. INTRODUCTION... 1 II. EXECUTIVE SUMMARY... 7 A. Strong Rules That Protect Consumers from Past and Future Tactics that Threaten the Open Internet Clear, Bright-Line Rules No Unreasonable Interference or Unreasonable Disadvantage to Consumers or Edge Providers Enhanced Transparency Scope of the Rules Enforcement B. Promoting Investment with a Modern Title II C. Sustainable Open Internet Rules D. Broad Forbearance III. REPORT AND ORDER ON REMAND: PROTECTING AND PROMOTING THE OPEN INTERNET A. History of Openness Regulation B. The Continuing Need for Open Internet Protections An Open Internet Promotes Innovation, Competition, Free Expression, and Infrastructure Deployment Broadband Providers Have the Incentive and Ability to Limit Openness Mobile Broadband Services The Commission Must Act to Preserve Internet Openness C. Strong Rules That Protect Consumers from Practices That Can Threaten the Open Internet Clear, Bright Line Rules No Unreasonable Interference or Unreasonable Disadvantage Standard for Internet Conduct Transparency Requirements to Protect and Promote Internet Openness D. Scope of the Rules Para.

3 A. Regulatory Flexibility Analysis B. Paperwork Reduction Act of 1995 Analysis C. Congressional Review Act D. Data Quality Act E. Accessible Formats IX. ORDERING CLAUSES APPENDIX A Final Rules APPENDIX B Final Regulatory Flexibility Act Analysis I. INTRODUCTION 1. The open Internet drives the American economy and serves, every day, as a critical tool for America s citizens to conduct commerce, communicate, educate, entertain, and engage in the world around them. The benefits of an open Internet are undisputed. But it must remain open: open for commerce, innovation, and speech; open for consumers and for the innovation created by applications developers and content companies; and open for expansion and investment by America s broadband providers. For over a decade, the Commission has been committed to protecting and promoting an open Internet. 2. Four years ago, the Commission adopted open Internet rules to protect and promote the virtuous cycle that drives innovation and investment on the Internet both at the edges of the network, as well as in the network itself. In the years that those rules were in place, significant investment and groundbreaking innovation continued to define the broadband marketplace. For example, according to US Telecom, broadband providers invested $212 billion in the three years following adoption of the rules from 2011 to 2013 more than in any three year period since Likewise, innovation at the edge moves forward unabated. For example, 2010 was the first year that the majority of Netflix customers received their video content via online streaming rather than via DVDs in red envelopes. Today, Netflix sends the most peak downstream traffic in North America of any company. Other innovative service providers have experienced extraordinary growth Etsy reports that it has grown from $314 million in merchandise sales in 2010 to $1.35 billion in merchandise sales in And, just as importantly, new kinds of innovative businesses are busy being born. In the video space alone, in just the last sixth months, CBS and HBO have announced new plans for streaming their content free of cable subscriptions; DISH has launched a new package of channels that includes ESPN, and Sony is not far behind; and Discovery Communications founder John Hendricks has announced a new over-the-top service providing bandwidth-intensive programming. This year, Amazon took home two Golden Globes for its new series Transparent. 4. The lesson of this period, and the overwhelming consensus on the record, is that carefully-tailored rules to protect Internet openness will allow investment and innovation to continue to flourish. Consistent with that experience and the record built in this proceeding, today we adopt carefully-tailored rules that would prevent specific practices we know are harmful to Internet openness blocking, throttling, and paid prioritization as well as a strong standard of conduct designed to prevent the deployment of new practices that would harm Internet openness. We also enhance our transparency rule to ensure that consumers are fully informed as to whether the services they purchase are delivering what they expect. 5. Carefully-tailored rules need a strong legal foundation to survive and thrive. Today, we provide that foundation by grounding our open Internet rules in multiple sources of legal authority including both section 706 of the Telecommunications Act and Title II of the Communications Act. Moreover, we concurrently exercise the Commission s forbearance authority to forbear from application of 27 provisions of Title II of the Communications Act, and over 700 Commission rules and regulations. This is a Title II tailored for the 21 st century, and consistent with the light-touch regulatory framework that has facilitated the tremendous investment and innovation on the Internet. We expressly eschew the future use of prescriptive, industry-wide rate regulation. Under this approach, consumers can continue to 3

4 enjoy unfettered access to the Internet over their fixed and mobile broadband connections, innovators can continue to enjoy the benefits of a platform that affords them unprecedented access to hundreds of millions of consumers across the country and around the world, and network operators can continue to reap the benefits of their investments. 6. Informed by the views of nearly 4 million commenters, our staff-led roundtables, numerous ex parte presentations, meetings with individual Commissioners and staff, and more, our decision today once and for all puts into place strong, sustainable rules, grounded in multiple sources of our legal authority, to ensure that Americans reap the economic, social, and civic benefits of an open Internet today and into the future. II. EXECUTIVE SUMMARY 7. The benefits of rules and policies protecting an open Internet date back over a decade and must continue. 1 Just over a year ago, the D.C. Circuit in Verizon v. FCC struck down the Commission s 2010 conduct rules against blocking and unreasonable discrimination. 2 But the Verizon court upheld the Commission s finding that Internet openness drives a virtuous cycle in which innovations at the edges of the network enhance consumer demand, leading to expanded investments in broadband infrastructure that, in turn, spark new innovations at the edge. 3 The Verizon court further affirmed the Commission s conclusion that broadband providers represent a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment Threats to Internet openness remain today. The record reflects that broadband providers hold all the tools necessary to deceive consumers, degrade content, or disfavor the content that they don t like. 5 The 2010 rules helped to deter such conduct while they were in effect. But, as Verizon frankly told the court at oral argument, but for the 2010 rules, it would be exploring agreements to charge certain content providers for priority service. 6 Indeed, the wireless industry had a well-established record of 1 See, e.g., National Arts and Cultural Organizations Comments at 3 ( [B]roadband Internet service has inspired tremendous innovation, which has in turn enabled individual artists and arts organizations to reach new audiences, cultivate patrons and supporters, collaborate with peers, stimulate local economies and enrich cultural and civic discourse. ); Common Cause Comments at 3-8 (arguing that the open Internet promotes free speech and civic engagement); Letter from Lauren M. Wilson, Policy Counsel, Free Press to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , (filed Jan. 13, 2015) (Free Press et al. Jan. 13, 2015 Ex Parte Letter) (describing the important role the open Internet plays in the work of public interest, social justice, and activist groups); Higher Education and Libraries Comments at ii ( Libraries and institutions of higher education depend upon an open Internet to carry out their missions and to serve their communities. ); Engine Advocacy Comments at 3-13 (arguing that an open Internet has been essential to promoting entrepreneurship, economic growth, and innovation). Unless otherwise noted, all citations to comments in this item refer to comments filed in GN Docket No Remand PN Comments is used to denote comments that were filed in response to the Feb. 19, 2014 Public Notice released by the Wireline Competition Bureau. See New Docket Established to Address Open Internet Remand, GN Docket No , Public Notice, 29 FCC Rcd 1746 (Wireline Comp. Bur. 2014). Comments or Reply are used to denote comments filed in response to the Notice of Proposed Rulemaking released by the Commission on May 15, See Protecting and Promoting the Open Internet, GN Docket No , Notice of Proposed Rulemaking, 29 FCC Rcd 5561 (2014) (2014 Open Internet NPRM). 2 Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014). 3 Id. at Id. at See infra Section III.B. 6 Verizon Oral Arg. Tr. at 31 ( I m authorized to state by my client [Verizon] today that, but for these rules, we would be exploring those commercial arrangements, but this order prohibits those, and in fact would shrink the types of services that will be available on the Internet. ). But see Letter from William H. Johnson, Vice President & Associate General Counsel, Verizon, to Marlene H. Dortch, Secretary, FCC, GN Docket No at 1 (filed Feb. (continued.) 4

5 trying to keep applications within a carrier-controlled walled garden in the early days of mobile applications. That specific practice ended when Internet Protocol (IP) created the opportunity to leap the wall. But the Commission has continued to hear concerns about other broadband provider practices involving blocking or degrading third-party applications. 9. Emerging Internet trends since 2010 give us more, not less, cause for concern about such threats. First, mobile broadband networks have massively expanded since They are faster, more broadly deployed, more widely used, and more technologically advanced. At the end of 2010, there were about 70,000 devices in the U.S. that had LTE wireless connections. Today, there are more than 127 million. 7 We welcome this tremendous investment and innovation in the mobile marketplace. With carefully-tailored rules in place, that investment can continue to flourish and consumers can continue to enjoy unfettered access to the Internet over their mobile broadband connections. Indeed, mobile broadband is becoming an increasingly important pathway to the Internet independent of any fixed broadband connections consumers may have, given that mobile broadband is not a full substitute for fixed broadband connections. 8 And consumers must be protected, for example from mobile commercial practices masquerading as reasonable network management. Second, and critically, the growth of online streaming video services has spurred further evolution of the Internet. 9 Currently, video is the (Continued from previous page) 11, 2015) (Verizon Feb. 11 Ex Parte Letter) (arguing that [t]he commercial arrangements referenced by counsel had nothing to do with restrict[ing] access to content ). Also, during the oral argument before the D.C. Circuit, Verizon stated that in paragraph 64 of the Order the Agency also sets forth the no charging of edge providers rule as a corollary to the no blocking rule, and that s a large part of what is causing us our harm here. In response, Judge Silberman stated, if you were allowed to charge, which are you assuming you re allowed to charge because of the anti-common carrier point of view, if somebody refused to pay then just like in the dispute between C[B]S and Warner, Time Warner... you could refuse to carry. Verizon s counsel responded: [r]ight. Verizon Oral Arg. Tr. at Fierce Wireless, 1H2014: LTE Share 33% of all Mobile Connections in the U.S. and Canada vs. 4% Worldwide, (Sept. 2014), (reporting remarkable growth with 16 million LTE connections at the end of June 2012; 63 million LTE connections as of June 2013; 127 million LTE connections as of June 2014). 8 See, e.g., Section 6002(B) of the Omnibus Budget Reconciliation Act of 1993; Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, WT Docket No , Seventeenth Report, 29 FCC Rcd (Wireless Tel. Bur. 2014) (17th Mobile Wireless Report); Robert F. Roche and Liz Dale, Annual Wireless Survey Results: A Comprehensive Report from CTIA Analyzing the U.S. Wireless Industry (June 2014); Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, as Amended by the Broadband Data Improvement Act, GN Docket No , 2015 Broadband Progress Report and Notice of Inquiry, FCC 15-10, at para. 120 (rel. Feb. 4, 2015) (2015 Broadband Progress Report) ( We recognize that many households subscribe to both fixed and mobile services because they use fixed and mobile services in fundamentally different ways and, as such, view fixed and mobile services as distinct product offerings. ). 9 See supra para. 3; see also Netflix Inc., 2010 Annual Report (Form 10-K) (Feb. 18, 2011), Letter from Reed Hastings, CEO and David Wells, CFO, Netflix to Shareholders of Netflix (Jan. 20, 2015), (follow Q4 14 Letter to shareholders hyperlink) (for 2014, Netflix reported 39.1 million domestic streaming subscribers compared to 5.8 million domestic DVD subscribers); Emily Steel, Cord-Cutters Rejoice: CBS Joins Web Stream, N.Y. Times (Oct. 16, 2014), Brian Stelter, ESPN on the web for $20 a month is coming soon, CNN Money (Jan. 5, 2015), Alex Ben Block, Discovery Founder Launching SVOD Service Described as Netflix "For Curious People, Hollywood Reporter (Jan. 14, 2014), Jenelle Riley, Amazon, Transparent Make History at Golden Globes, Variety (Jan. 11, 2015), 5

6 dominant form of traffic on the Internet. These video services directly confront the video businesses of the very companies that supply them broadband access to their customers The Commission, in its May Notice of Proposed Rulemaking, asked a fundamental question: What is the right public policy to ensure that the Internet remains open? 11 It proposed to enhance the transparency rule, and follow the Verizon court s blueprint by relying on section 706 to adopt a no-blocking rule and a requirement that broadband providers engage in commercially reasonable practices. The Commission also asked about whether it should adopt other bright-line rules or different standards using other sources of Commission authority, including Title II. And if Title II were to apply, the Commission asked about how it should exercise its authority to forbear from Title II obligations. It asked whether mobile services should also be classified under Title II. 11. Three overarching objectives have guided us in answering these questions, based on the vast record before the Commission: America needs more broadband, better broadband, and open broadband networks. These goals are mutually reinforcing, not mutually exclusive. Without an open Internet, there would be less broadband investment and deployment. And, as discussed further below, all three are furthered through the open Internet rules and balanced regulatory framework we adopt today In enacting the Administrative Procedure Act (APA), Congress instructed expert agencies conducting rulemaking proceedings to give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments. 13 It is public comment that cements an agency s expertise. As was explained in the seminal report that led to the enactment of the APA: The reason for [an administrative agency s] existence is that it is expected to bring to its task greater familiarity with the subject than legislators, dealing with many subjects, can have. But its knowledge is rarely complete, and it must always learn the frequently clashing viewpoints of those whom its regulations will affect Congress could not have imagined when it enacted the APA almost seventy years ago that the day would come when nearly 4 million Americans would exercise their right to comment on a proposed rulemaking. But that is what has happened in this proceeding and it is a good thing. The Commission has listened and it has learned. Its expertise has been strengthened. Public input has improve[d] the quality of agency rulemaking by ensuring that agency regulations will be tested by exposure to diverse public comment. 15 There is general consensus in the record on the need for the 10 See Public Knowledge, Benton Foundation, and Access Sonoma Broadband (Public Knowledge) Comments at (discussing exemption of Xfinity online video application on Xbox from Comcast s data cap without similar exemption for unaffiliated over-the-top video services) Open Internet NPRM, 29 FCC Rcd at 5562, para Consistent with the Verizon court s analysis, this Order need not conclude that any specific market power exists in the hands of one or more broadband providers in order to create and enforce these rules. Thus, these rules do not address, and are not designed to deal with, the acquisition or maintenance of market power or its abuse, real or potential. Moreover, it is worth noting that the Commission acts in a manner that is both complementary to the work of the antitrust agencies and supported by their application of antitrust laws. See generally 47 U.S.C. 152(b) ( [N]othing in this Act... shall be construed to modify, impair, or supersede the applicability of any of the antitrust laws. ). Nothing in this Order in any way precludes the Antitrust Division of the Department of Justice or the Commission itself from fulfilling their respective responsibilities under Section 7 of the Clayton Act (15 U.S.C. 18), or the Commission s public interest standard as it assesses prospective transactions U.S.C. 553(c). 14 Attorney General s Committee, Final Report of the Attorney General Committee at 102 (1941), 15 Small Refiner Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 547 (D.C. Cir. 1983) (quoting BASF Wyandotte Corp. v. Costle, 598 F.2d 637, 641 (1st Cir. 1979)). 6

7 Commission to provide certainty with clear, enforceable rules. There is also general consensus on the need to have such rules. Today the Commission, informed by all of those views, makes a decision grounded in the record. The Commission has considered the arguments, data, and input provided by the commenters, even if not in agreement with the particulars of this Order; that public input has created a robust record, enabling the Commission to adopt new rules that are clear and sustainable. A. Strong Rules That Protect Consumers from Past and Future Tactics that Threaten the Open Internet 1. Clear, Bright-Line Rules 14. Because the record overwhelmingly supports adopting rules and demonstrates that three specific practices invariably harm the open Internet Blocking, Throttling, and Paid Prioritization this Order bans each of them, applying the same rules to both fixed and mobile broadband Internet access service. 15. No Blocking. Consumers who subscribe to a retail broadband Internet access service must get what they have paid for access to all (lawful) destinations on the Internet. This essential and well-accepted principle has long been a tenet of Commission policy, stretching back to its landmark decision in Carterfone, which protected a customer s right to connect a telephone to the monopoly telephone network. 16 Thus, this Order adopts a straightforward ban: A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or nonharmful devices, subject to reasonable network management. 16. No Throttling. The 2010 open Internet rule against blocking contained an ancillary prohibition against the degradation of lawful content, applications, services, and devices, on the ground that such degradation would be tantamount to blocking. This Order creates a separate rule to guard against degradation targeted at specific uses of a customer s broadband connection: A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not impair or degrade lawful Internet traffic on the basis of Internet content, application, or service, or use of a non-harmful device, subject to reasonable network management. 17. The ban on throttling is necessary both to fulfill the reasonable expectations of a customer who signs up for a broadband service that promises access to all of the lawful Internet, and to avoid gamesmanship designed to avoid the no-blocking rule by, for example, rendering an application effectively, but not technically, unusable. It prohibits the degrading of Internet traffic based on source, destination, or content. 17 It also specifically prohibits conduct that singles out content competing with a broadband provider s business model. 18. No Paid Prioritization. Paid prioritization occurs when a broadband provider accepts payment (monetary or otherwise) to manage its network in a way that benefits particular content, applications, services, or devices. To protect against fast lanes, this Order adopts a rule that establishes that: A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not engage in paid prioritization. 16 Use of the Carterfone Device in Message Toll Telephone Service; Thomas F. Carter and Carter Electronics Corp., Dallas, Tex. (Complainants), v. American Telephone and Telegraph Co., Associated Bell System Companies, Southwestern Bell Telephone Co., and General Telephone Co. of the Southwest (Defendants), Docket Nos , 17073, Decision, 13 FCC 2d 420 (1968) (Carterfone), recon. denied, 14 FCC 2d 571 (1968). 17 To be clear, the protections of the no-blocking and no-throttling rules apply to particular classes of applications, content and services as well as particular applications, content, and services. 7

8 Paid prioritization refers to the management of a broadband provider s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity The record demonstrates the need for strong action. The Verizon court itself noted that broadband networks have powerful incentives to accept fees from edge providers, either in return for excluding their competitors or for granting them prioritized access to end users. 19 Mozilla, among many such commenters, explained that [p]rioritization... inherently creates fast and slow lanes. 20 Although there are arguments that some forms of paid prioritization could be beneficial, the practical difficulty is this: the threat of harm is overwhelming, 21 case-by-case enforcement can be cumbersome for individual consumers or edge providers, and there is no practical means to measure the extent to which edge innovation and investment would be chilled. And, given the dangers, there is no room for a blanket exception for instances where consumer permission is buried in a service plan the threats of consumer deception and confusion are simply too great No Unreasonable Interference or Unreasonable Disadvantage to Consumers or Edge Providers 20. The key insight of the virtuous cycle is that broadband providers have both the incentive and the ability to act as gatekeepers standing between edge providers and consumers. As gatekeepers, they can block access altogether; they can target competitors, including competitors to their own video services; and they can extract unfair tolls. Such conduct would, as the Commission concluded in 2010, reduce the rate of innovation at the edge and, in turn, the likely rate of improvements to network infrastructure. 23 In other words, when a broadband provider acts as a gatekeeper, it actually chokes consumer demand for the very broadband product it can supply. 18 Unlike the no-blocking and no-throttling rules, there is no reasonable network management exception to the paid prioritization rule because paid prioritization is inherently a business practice rather than a network management practice. 19 Verizon, 740 F.3d at Mozilla Comments at See, e.g., Free Press Comments at 50 ( In packet-switching, if there is no congestion, there is no meaning to priority. ). 22 AT&T Reply at 3 (proposing a distinction between paid prioritization that is not directed by end users, and prioritization arrangements that are user-driven and that the Commission should not categorically foreclose such consumer-driven choices ). All Commission rules are subject to waiver requests and that principle applies to the open Internet rules. See 47 C.F.R ; Blanca Telephone Co. v. FCC, 743 F.3d 860, 864 (D.C. Cir. 2014) ( When evaluating an agency s interpretation and application of a general, discretionary waiver standard [o]ur review... is extremely limited. ) (quoting BDPCS, Inc. v. FCC, 351 F.3d 1177, 1181 (D.C. Cir. 2003)). As Public Knowledge has recognized, the Commission must not only permit such Petitions and waiver applications, but genuinely consider their merits [however,] the Commission has broad discretion with regard to what standard it will apply. Letter from Gene Kimmelman, President, Public Knowledge to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , , at 2 (filed Nov. 7, 2014) (Public Knowledge Nov. 7, 2014 Ex Parte Letter). The Order requires any applicant to demonstrate that the proposed paid prioritization practice would provide some significant public interest benefit and would not harm the open nature of the Internet. It is very important to understand that a party seeking a waiver is banned from an inappropriate practice. Its only recourse is to seek a waiver, and that waiver request would not be decided until the Commission, after public comment and its own investigation, reaches a decision. 23 Preserving the Open Internet, GN Docket No , WC Docket No , Report and Order, 25 FCC Rcd 17905, 17911, para. 14 (2010) (2010 Open Internet Order), aff d in part, vacated and remanded in part sub nom. Verizon v. FCC, 740 F.3d 623 (D.C. Cir. 2014). 8

9 21. The bright-line bans on blocking, throttling, and paid prioritization will go a long way to preserve the virtuous cycle. But not all the way. Gatekeeper power can be exercised through a variety of technical and economic means, and without a catch-all standard, it would be that, as Benjamin Franklin said, a little neglect may breed great mischief. 24 Thus, the Order adopts the following standard: Any person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not unreasonably interfere with or unreasonably disadvantage (i) end users ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a violation of this rule. 22. This no unreasonable interference/disadvantage standard protects free expression, thus fulfilling the congressional policy that the Internet offer[s] a forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity. 25 And the standard will permit considerations of asserted benefits of innovation as well as threatened harm to end users and edge providers. effect: 3. Enhanced Transparency 23. The Commission s 2010 transparency rule, upheld by the Verizon court, remains in full A person engaged in the provision of broadband Internet access service shall publicly disclose accurate information regarding the network management practices, performance, and commercial terms of its broadband Internet access services sufficient for consumers to make informed choices regarding use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings Today s Order reaffirms the importance of ensuring transparency, so that consumers are fully informed about the Internet access they are purchasing and so that edge providers have the information they need to understand whether their services will work as advertised. To do that, the Order builds on the strong foundation established in 2010 and enhances the transparency rule for both end users and edge providers, including by adopting a requirement that broadband providers always must disclose promotional rates, all fees and/or surcharges, and all data caps or data allowances; adding packet loss as a measure of network performance that must be disclosed; and requiring specific notification to consumers that a network practice is likely to significantly affect their use of the service. Out of an abundance of caution and in response to a request by the American Cable Association, we also adopt a temporary exemption from these enhancements for small providers (defined for the purposes of the temporary exception as providers with 100,000 or fewer subscribers), and we direct our Consumer & Governmental Affairs Bureau to adopt an Order by December 15, 2015 concerning whether to make the exception permanent and, if so, the appropriate definition of small. Lastly, we create for all providers a safe harbor process for the format and nature of the required disclosure to consumers, which we believe will result in more effective presentation of consumer-focused information by broadband providers. 4. Scope of the Rules 25. The open Internet rules described above apply to both fixed and mobile broadband Internet access service. Consistent with the 2010 Order, today s Order applies its rules to the consumer- 24 Benjamin Franklin, Poor Richard s Almanac (1757) U.S.C. 230(a)(3) C.F.R

10 facing service that broadband networks provide, which is known as broadband Internet access service 27 (BIAS) and is defined to be: A mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service. This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence, or that is used to evade the protections set forth in this Part. 26. As in 2010, BIAS does not include enterprise services, virtual private network services, hosting, or data storage services. Further, we decline to apply the open Internet rules to premises operators to the extent they may be offering broadband Internet access service as we define it today. 27. In defining this service we make clear that we are responding to the Verizon court s conclusion that broadband providers furnish a service to edge providers (and that this service was being treated as common carriage per se). As discussed further below, we make clear that broadband Internet access service encompasses this service to edge providers. Broadband providers sell retail customers the ability to go anywhere (lawful) on the Internet. Their representation that they will transport and deliver traffic to and from all or substantially all Internet endpoints includes the promise to transmit traffic to and from those Internet endpoints back to the user. 28. Interconnection. BIAS involves the exchange of traffic between a broadband Internet access provider and connecting networks. The representation to retail customers that they will be able to reach all or substantially all Internet endpoints necessarily includes the promise to make the interconnection arrangements necessary to allow that access. 29. As discussed below, we find that broadband Internet access service is a telecommunications service and subject to sections 201, 202, and 208 (along with key enforcement provisions). As a result, commercial arrangements for the exchange of traffic with a broadband Internet access provider are within the scope of Title II, and the Commission will be available to hear disputes raised under sections 201 and 202 on a case-by-case basis: an appropriate vehicle for enforcement where disputes are primarily over commercial terms and that involve some very large corporations, including companies like transit providers and Content Delivery Networks (CDNs), that act on behalf of smaller edge providers. 30. But this Order does not apply the open Internet rules to interconnection. Three factors are critical in informing this approach to interconnection. First, the nature of Internet traffic, driven by massive consumption of video, has challenged traditional arrangements placing more emphasis on the use of CDNs or even direct connections between content providers (like Netflix or Google) and last-mile broadband providers. Second, it is clear that consumers have been subject to degradation resulting from commercial disagreements, 28 perhaps most notably in a series of disputes between Netflix and large last- 27 We note that our use of the term broadband in this Order includes but is not limited to services meeting the threshold for advanced telecommunications capability, as defined in Section 706 of the Telecommunications Act of 1996, as amended. 47 U.S.C. 1302(b). Section 706 defines that term as high-speed, switched, broadband telecommunications capability that enables users to originate and receive high-quality voice, data, graphics, and video telecommunications using any technology. 47 U.S.C. 1302(d)(1). The 2015 Broadband Progress Report specifically notes that advanced telecommunications capability, while sometimes referred to as broadband, differs from the Commission s use of the term broadband in other contexts Broadband Progress Report at n.1 (rel. Feb. 4, 2015). 28 See Letter from Sarah J. Morris, Senior Policy Counsel, Open Technology Institute, New America Foundation to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , (filed Oct. 30, 2014), Attach. MLab, ISP (continued.) 10

11 mile broadband providers. But, third, the causes of past disruption and just as importantly the potential for future degradation through interconnection disputes are reflected in very different narratives in the record. 31. While we have more than a decade s worth of experience with last-mile practices, we lack a similar depth of background in the Internet traffic exchange context. Thus, we find that the best approach is to watch, learn, and act as required, but not intervene now, especially not with prescriptive rules. This Order for the first time provides authority to consider claims involving interconnection, a process that is sure to bring greater understanding to the Commission. 32. Reasonable Network Management. As with the 2010 rules, this Order contains an exception for reasonable network management, which applies to all but the paid prioritization rule (which, by definition, is not a means of managing a network): A network management practice is a practice that has a primarily technical network management justification, but does not include other business practices. A network management practice is reasonable if it is primarily used for and tailored to achieving a legitimate network management purpose, taking into account the particular network architecture and technology of the broadband Internet access service. 33. Recently, significant concern has arisen when mobile providers have attempted to justify certain practices as reasonable network management practices, such as applying speed reductions to customers using unlimited data plans in ways that effectively force them to switch to price plans with less generous data allowances. For example, in the summer of 2014, Verizon announced a change to its unlimited data plan for LTE customers, which would have limited the speeds of LTE customers using grandfathered unlimited plans once they reached a certain level of usage each month. Verizon briefly described this change as within the scope of reasonable network management, before changing course and withdrawing the change. 34. With mobile broadband service now subject to the same rules as fixed broadband service, the Order expressly recognizes that evaluation of network management practices will take into account the additional challenges involved in the management of mobile networks, including the dynamic conditions under which they operate. It also recognizes the specific network management needs of other technologies, such as unlicensed Wi-Fi networks. 35. Non-Broadband Internet Access Service Data Services. The 2010 rules included an exception for specialized services. This Order likewise recognizes that some data services like facilities-based VoIP offerings, heart monitors, or energy consumption sensors may be offered by a broadband provider but do not provide access to the Internet generally. The term specialized services can be confusing because the critical point is not whether the services are specialized; it is that they are not broadband Internet access service. IP-services that do not travel over broadband Internet access service, like the facilities-based VoIP services used by many cable customers, are not within the scope of the open Internet rules, which protect access or use of broadband Internet access service. Nonetheless, these other non-broadband Internet access service data services could be provided in a manner that undermines the purpose of the open Internet rules and that will not be permitted. The Commission expressly reserves the authority to take action if a service is, in fact, providing the functional equivalent of broadband Internet access service or is being used to evade the open Internet rules. The Commission will vigilantly watch for such abuse, and its actions will be aided by the existing transparency requirement that non-broadband Internet access service data services be disclosed. (Continued from previous page) Interconnection and Its Impact on Consumer Internet Performance, A Measurement Lab Consortium Technical Report (Oct. 28, 2014) (MLab ISP Interconnection Report). 11

12 5. Enforcement 36. The Commission may enforce the open Internet rules through investigation and the processing of complaints (both formal and informal). In addition, the Commission may provide guidance through the use of enforcement advisories and advisory opinions, and it will appoint an ombudsperson. In order to provide the Commission with additional understanding, particularly of technical issues, the Order delegates to the Enforcement Bureau the authority to request a written opinion from an outside technical organization or otherwise to obtain objective advice from industry standard-setting bodies or similar organizations. B. Promoting Investment with a Modern Title II 37. Today, our forbearance approach results in over 700 codified rules being inapplicable, a light-touch approach for the use of Title II. This includes no unbundling of last-mile facilities, no tariffing, no rate regulation, and no cost accounting rules, which results in a carefully tailored application of only those Title II provisions found to directly further the public interest in an open Internet and more, better, and open broadband. Nor will our actions result in the imposition of any new federal taxes or fees; the ability of states to impose fees on broadband is already limited by the congressional Internet tax moratorium. 38. This is Title II tailored for the 21 st Century. Unlike the application of Title II to incumbent wireline companies in the 20 th Century, a swath of utility-style provisions (including tariffing) will not be applied. Indeed, there will be fewer sections of Title II applied than have been applied to Commercial Mobile Radio Service (CMRS), where Congress expressly required the application of Sections 201, 202, and 208, and permitted the Commission to forbear from others. In fact, Title II has never been applied in such a focused way. 39. History demonstrates that this careful approach to the use of Title II will not impede investment. First, mobile voice services have been regulated under a similar light-touch Title II approach since 1994 and investment and usage boomed. 29 For example, between 1993 and 2009 (while voice was the primary driver of mobile revenues), the mobile industry invested more than $271 billion in building out networks, during a time in which industry revenues increased by 1300 percent and subscribership grew over 1600 percent. 30 Moreover, more recently, Verizon Wireless has invested tens of billions of dollars in deploying mobile wireless services since being subject to the 700 MHz C Block open access rules, which overlap in significant parts with the open Internet rules we adopt today. 31 But that is not all. Today, key provisions of Title II apply to certain enterprise broadband services that AT&T has 29 See Implementation of Sections 3(n) and 332 of the Communications Act, Regulatory Treatment of Mobile Services, GN Docket No , Second Report and Order, 9 FCC Rcd 1411 (1994) (CMRS Second Report & Order) (forbearing from various Title II requirements for CMRS). 30 See CTIA Wireless Industry Indices: Annual Wireless Survey Results: A Comprehensive Report from CTIA Analyzing the U.S. Wireless Industry Year-End 2013 Results, 2014 at 25, 76, See Verizon Communications, Inc., Financial Reporting Quarterly Reports (Form 10-K) (last visited Feb. 23, 2015); see also Service Rules for the , and MHz Bands; Revision of the Commission's Rules to Ensure Compatibility with Enhanced 911 Emergency Calling Systems; Section 68.4(a) of the Commission's Rules Governing Hearing Aid- Compatible Telephones; Biennial Regulatory Review-Amendment of Parts 1, 22, 24, 27, and 90 to Streamline and Harmonize Various Rules Affecting Wireless Radio Services; Former Nextel Communications, Inc. Upper 700 MHz Guard Band Licenses and Revisions to Part 27 of the Commission's Rules; Implementing a Nationwide, Broadband, Interoperable Public Safety Network in the 700 MHz Band; Development of Operational, Technical and Spectrum Requirements for Meeting Federal, State and Local Public Safety Communications Requirements Through the Year 2010; Declaratory Ruling on Reporting Requirement under Commission's Part 1 Anti-Collusion Rule, WT Docket Nos , , , , 96-86, PS Docket No , CC Docket No , Second Report and Order, 22 FCC Rcd 15289, 15364, paras (2007) (700 MHz Second Report and Order); 47 C.F.R

13 described as the epicenter of the broadband investment the Commission seeks to promote. 32 Title II has been maintained by more than 1000 rural local exchange carriers that have chosen to offer their DSL and fiber broadband services as common carrier offerings. And, of course, wireline DSL was regulated as a common-carrier service until 2005 including a period in the late 90s and the first five years of this century that saw the highest levels of wireline broadband infrastructure investment to date In any event, recent events have demonstrated that our rules will not disrupt capital markets or investment. Following recent discussions of the potential application of Title II to consumer broadband, investment analysts have issued reports concluding that Title II with appropriate forbearance is unlikely to alter broadband provider conduct or have any negative effect on their value or future profitability. 34 Executives from large broadband providers have also repeatedly represented to investors that the prospect of regulatory action will not influence their investment strategies or long-term profitability; indeed, Sprint has gone so far to say that it does not believe that a light touch application of Title II, including appropriate forbearance, would harm the continued investment in, and deployment of, mobile broadband services. 35 Finally, the recent AWS auction, conducted under the prospect of Title II regulation, generated bids (net of bidding credits) of more than $41 billion further demonstrating that robust investment is not inconsistent with a light-touch Title II regime Comments of AT&T, Inc., WC Docket No , at 2-3 (filed Apr. 16, 2013). 33 See US Telecom Research Brief, Latest Data Show Broadband Investment Surged in 2013 at 2, Chart 2 (Sept. 8, 2014) (wireline broadband capital expenditures peaked at $79 billion in 2000), vestment%20surged%20in% pdf. 34 See, e.g., Philip Cusick et al., Net Neutrality: Prepared for Title II but We Take Less Negative View, J.P. Morgan, (Nov. 11, 2014) ( We wouldn t change any of the fundamental assumptions on cable companies under our coverage under Title II, and shares are likely to rebound over time. ); Paul Gallant, Title 2 Appears Likely Outcome at FCC, but Headline Risk May Exceed Real Risk, Guggenheim Securities, LLC, (Dec. 8, 2014) ( We would not view a Title II decision by the FCC as changing the existing Washington framework for cable broadband service. The marketplace reality under Title II would be far less problematic for cable/telcos than most believe. ); Paul de Sa et al., Bernstein Research, (Nov. 17, 2014) ( We think net neutrality is largely irrelevant for fundamental value drivers. But headline noise in the coming months will likely result in fears about price regulation, increasing volatility and perhaps temporarily depressing cable & telco equity values. ). 35 Letter from Stephen Bye, Chief Technology Officer, Sprint, to Chairman Wheeler, FCC, GN Docket No , at 1 (filed Jan. 16, 2015) (Sprint Jan Ex Parte Letter); see also Transcript of Verizon Communications Presents at UBS 42nd Annual Global Media and Communications Conference Call, Seeking Alpha (Dec ), available at (quoting Verizon CFO Fran Shammo as saying I mean, to be real clear, I mean this does not influence the way we invest. I mean we re going to continue to invest in our networks and our platforms, both in Wireless and Wireline FiOS and where we need to. So nothing will influence that. I mean if you think about it, look, I mean we were born out of a highly regulated company, so we know how this operates. ); Brian Fung, Verizon: Actually Strong Net Neutrality Rules Won t Affect our Network Investment, Washington Post (Dec. 10, 2014), Brian Fung, Comcast, Charter and Time Warner Cable All Say Obama s Net Neutrality Plan Shouldn t Worry Investors, Washington Post (Dec. 16, 2014), Letter from Angie Kronenberg, COMPTEL to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 1 (filed Dec. 11, 2014) (COMPTEL Dec. 11, 2014 Ex Parte Letter). 36 See John Eggerton, AWS-3 Powers Past $44 Billion, Broadcasting & Cable (Dec. 16, 2014), 13

14 C. Sustainable Open Internet Rules 41. We ground our open Internet rules in multiple sources of legal authority including both section 706 and Title II of the Communications Act. The Verizon court upheld the Commission s use of section 706 as a substantive source of legal authority to adopt open Internet protections. But it held that, [g]iven the Commission s still-binding decision to classify broadband providers... as providers of information services, open Internet protections that regulated broadband providers as common carriers would violate the Act. 37 Rejecting the Commission s argument that broadband providers only served retail consumers, the Verizon court went on to explain that broadband providers furnish a service to edge providers, thus undoubtedly functioning as edge providers carriers, and held that the 2010 no blocking and no unreasonable discrimination rules impermissibly obligated [broadband providers] to act as common carriers The Verizon decision thus made clear that section 706 affords the Commission substantive authority, and that open Internet protections are within the scope of that authority. And this Order relies on section 706 for the open Internet rules. But, in light of Verizon, absent a classification of broadband providers as providing a telecommunications service, the Commission could only rely on section 706 to put in place open Internet protections that steered clear of regulating broadband providers as common carriers per se. Thus, in order to bring a decade of debate to a certain conclusion, we conclude that the best path is to rely on all available sources of legal authority while applying them with a light touch consistent with further investment and broadband deployment. Taking the Verizon decision s implicit invitation, we revisit the Commission s classification of the retail broadband Internet access service as an information service and clarify that this service encompasses the so-called edge service. 43. Exercising our delegated authority to interpret ambiguous terms in the Communications Act, as confirmed by the Supreme Court in Brand X, 39 today s Order concludes that the facts in the market today are very different from the facts that supported the Commission s 2002 decision to treat cable broadband as an information service and its subsequent application to fixed and mobile broadband services. Those prior decisions were based largely on a factual record compiled over a decade ago, during an earlier time when, for example, many consumers would use homepages supplied by their broadband provider. In fact, the Brand X Court explicitly acknowledged that the Commission had previously classified the transmission service, which broadband providers offer, as a telecommunications service and that the Commission could return to that classification if it provided an adequate justification. 40 Moreover, a number of parties who, in this proceeding, now oppose our reclassification of broadband Internet access service, previously argued that cable broadband should be deemed a telecommunications service. 41 As the record reflects, times and usage patterns have changed and it is clear that broadband providers are offering both consumers and edge providers straightforward transmission capabilities that the Communications Act defines as a telecommunications service. 44. The Brand X decision made famous the metaphor of pizza delivery. Justice Scalia, in dissent, concluded that the Commission had exceeded its legal authority by classifying cable-modem service as an information service. 42 To make his point, Justice Scalia described a pizzeria offering 37 Verizon, 740 F.3d at Id. at Nat l Cable & Telecomms. Ass n v. Brand X Internet Servs., 545 U.S. 967, (2005) (Brand X). 40 Id. at 986, See infra para. 314 & n Id. at 1005 (Scalia, J., dissenting). 14

15 delivery services as well as selling pizzas and concluded that, similarly broadband providers were offering telecommunications services even if that service was not offered on a stand-alone basis To take Justice Scalia s metaphor a step further, suppose that in 2014, the pizzeria owners discovered that other nearby restaurants did not deliver their food and thus concluded that the pizzadelivery drivers could generate more revenue by delivering from any neighborhood restaurant (including their own pizza some of the time). Consumers would clearly understand that they are being offered a delivery service. 46. Today, broadband providers are offering stand-alone transmission capacity and that conclusion is not changed even if, as Justice Scalia recognized, other products may be offered at the same time. The trajectory of technology in the decade since the Brand X decision has been towards greater and greater modularity. For example, consumers have considerable power to combine their mobile broadband connections with the device, operating systems, applications, Internet services, and content of their choice. Today, broadband Internet access service is fundamentally understood by customers as a transmission platform through which consumers can access third-party content, applications, and services of their choosing. 47. Based on this updated record, this Order concludes that the retail broadband Internet access service available today is best viewed as separately identifiable offers of (1) a broadband Internet access service that is a telecommunications service (including assorted functions and capabilities used for the management and control of that telecommunication service) and (2) various add-on applications, content, and services that generally are information services. This finding more than reasonably interprets the ambiguous terms in the Communications Act, best reflects the factual record in this proceeding, and will most effectively permit the implementation of sound policy consistent with statutory objectives, including the adoption of effective open Internet protections. 48. This Order also revisits the Commission s prior classification of mobile broadband Internet access service as a private mobile service, which cannot be subject to common carrier regulation, and finds that it is best viewed as a commercial mobile service or, in the alternative, the functional equivalent of commercial mobile service. Under the statutory definition, commercial mobile services must be interconnected with the public switched network (as such terms are defined by regulation by the Commission). 44 Consistent with that delegation of authority to define these terms, and with the Commission s previous recognition that the public switched network will grow and change over time, this Order updates the definition of public switched network to reflect current technology, by including services that use public IP addresses. Under this revised definition, the Order concludes that mobile broadband Internet access service is interconnected with the public switched network. In the alternative, the Order concludes that mobile broadband Internet access service is the functional equivalent of commercial mobile service 45 because, like commercial mobile service, it is a widely available, for profit mobile service that offers mobile subscribers the capability to send and receive communications, including voice, on their mobile device. 49. By classifying broadband Internet access service under Title II of the Act, in our view the Commission addresses any limitations that past classification decisions placed on the ability to adopt strong open Internet rules, as interpreted by the D.C. Circuit in the Verizon case. 50. Having classified broadband Internet access service as a telecommunications service, we respond to the Verizon court s holding, supporting our open Internet rules under the Commission s Title 43 Id. at U.S.C. 332(d)(2). 45 Section 332 of the Act defines private mobile service as any mobile service... that is not a commercial mobile service or the functional equivalent of a commercial mobile service, as specified by regulation by the Commission. 47 U.S.C. 332(d)(3). 15

16 II authority and removing any common carriage limitation on the exercise of our section 706 authority. For mobile broadband services, we also ground the open Internet rules in our Title III authority to protect the public interest through the management of spectrum licensing. D. Broad Forbearance 51. In finding that broadband Internet access service is subject to Title II, we simultaneously exercise the Commission s forbearance authority to forbear from 30 statutory provisions and render over 700 codified rules inapplicable, to establish a light-touch regulatory framework tailored to preserving those provisions that advance our goals of more, better, and open broadband. We thus forbear from the vast majority of rules adopted under Title II. We do not, however, forbear from sections 201, 202, and 208 (or from related enforcement provisions), 46 which are necessary to support adoption of our open Internet rules. We also grant extensive forbearance, minimizing the burdens on broadband providers while still adequately protecting the public. 52. In addition, we do not forbear from a limited number of sections necessary to ensure consumers are protected, promote competition, and advance universal access, all of which will foster network investment, thereby helping to promote broadband deployment. 53. Section 222: Protecting Consumer Privacy. Ensuring the privacy of customer information both directly protects consumers from harm and eliminates consumer concerns about using the Internet that could deter broadband deployment. Among other things, section 222 imposes a duty on every telecommunications carrier to take reasonable precautions to protect the confidentiality of its customers proprietary information. 47 We take this mandate seriously. For example, the Commission recently took enforcement action under section 222 (and section 201(b)) against two telecommunications companies that stored customers personal information, including social security numbers, on unprotected, unencrypted Internet servers publicly accessible using a basic Internet search. 48 This unacceptably exposed these consumers to the risk of identity theft and other harms. 54. As the Commission has recognized, [c]onsumers privacy needs are no less important when consumers communicate over and use broadband Internet access than when they rely on [telephone] services. 49 Thus, this Order finds that consumers concerned about the privacy of their personal information will be more reluctant to use the Internet, stifling Internet service competition and growth. 50 Application of section 222 s protections will help spur consumer demand for those Internet access 46 Specifically, we do not forbear from the enforcement authorities set forth in sections 206, 207, 208, 209, 216, and 217. To preserve existing CALEA obligations that already apply to broadband Internet access service, we also decline to forbear from section U.S.C See also 47 C.F.R et seq U.S.C. 222(a); Implementation of the Telecommunications Act of 1996: Telecommunications Carriers Use of Customer Proprietary Network Information and Other Customer Information, CC Docket No , WC Docket No , Report and Order and Further Notice of Proposed Rulemaking, 22 FCC Rcd 6927, 6959, para. 64 (2007) (2007 CPNI Order). 48 See TerraCom, Inc. and YourTel America, Inc. Apparent Liability for Forfeiture, File No.: EB-TCD , Notice of Apparent Liability, 29 FCC Rcd 13325, , paras (2014). 49 Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities et al., CC Docket Nos , , 95-20, 98-10, WC Docket Nos , , Report and Order and Notice of Proposed Rulemaking, 20 FCC Rcd 14853, 14930, para. 148 (2005) (Wireline Broadband Classification Order); see also id. at 14931, para. 149 & n.447 (noting that long before Congress enacted section 222 of the Act, the Commission had recognized the need for privacy requirements associated with the provision of enhanced services and had adopted CPNI-related requirements in conjunction with other Computer Inquiry obligations ). 50 See, e.g., Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, as Amended by the Broadband Data Improvement Act, GN Docket No , Report, 27 FCC Rcd 10342, 10410, para. 154 (2012) (2012 Eighth Broadband Progress Report). 16

17 services, in turn driving demand for broadband connections, and consequently encouraging more broadband investment and deployment, consistent with the goals of the 1996 Act Sections 225/255/251(a)(2): Ensuring Disabilities Access. We do not forbear from those provisions of Title II that ensure access to broadband Internet access service by individuals with disabilities. All Americans, including those with disabilities, must be able to reap the benefits of an open Internet, and ensuring access for these individuals will further the virtuous cycle of consumer demand, innovation, and deployment. This Order thus concludes that application of sections 225, 255, and 251(a)(2) is necessary to protect consumers and furthers the public interest, as explained in greater detail below Section 224: Ensuring Infrastructure Access. For broadband Internet access service, we do not forbear from section 224 and the Commission s associated procedural rules (to the extent they apply to telecommunications carriers and services and are, thus, within the Commission s forbearance authority). 53 Section 224 of the Act governs the Commission s regulation of pole attachments. In particular, section 224(f)(1) requires utilities to provide cable system operators and telecommunications carriers the right of nondiscriminatory access to any pole, duct, conduit, or right-of-way owned or controlled by a utility. 54 Access to poles and other infrastructure is crucial to the efficient deployment of communications networks including, and perhaps especially, new entrants. 57. Section 254: Promoting Universal Broadband. Section 254 promotes the deployment and availability of communications networks to all Americans, including rural and low-income Americans furthering our goals of more and better broadband. With the exception of 254(d), (g), and (k) as discussed below, we therefore do not find the statutory test for forbearance from section 254 (and the related provision in section 214(e)) is met. We recognize that supporting broadband-capable networks is already a key component of Commission s current universal service policies. The Order concludes, however, that directly applying section 254 provides both more legal certainty for the Commission s prior decisions to offer universal service subsidies for deployment of broadband networks and adoption of broadband services and more flexibility going forward. 58. We partially forbear from section 254(d) and associated rules insofar as they would immediately require mandatory universal service contributions associated with broadband Internet access service CPNI Order, 22 FCC Rcd at 6957, para. 59; see also FCC, Connecting America: The National Broadband Plan at 55 (National Broadband Plan) (explaining that without privacy protections, new innovation and investment in broadband applications and content may be held back, and these applications and content, in turn, are likely the most effective means to advance many of Congress s goals for broadband). 52 As explained in greater detail below, this Order does, however, forbear in part from the application of TRS contribution obligations that otherwise would apply to broadband Internet access service. Section 251(a)(2) precludes the installation of network features, functions, or capabilities that do not comply with the guidelines and standards established pursuant to section 255 or 256. See infra Section V. 53 See, e.g., Letter from Kathryn Zachem, Senior Vice President, Comcast, to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , at 25 n.107 (filed Dec. 24, 2014) (Comcast Dec. 24, 2014 Ex Parte Letter); Letter from Matthew Brill, Counsel for NCTA, to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 21 (Dec. 23, 2014) (NCTA Dec. 23, 2014 Ex Parte Letter); see also, e.g., Letter from Marvin Ammori and Julie Samuels, to Marlene H. Dortch, Secretary, FCC, GN Docket No at 1 (filed Nov. 12, 2014) ( Title II forbearance should be implemented in such a way so as to encourage continued deployment and investment in networks by for example preserving pole attachment rights. ) U.S.C. 224(f)(1). 55 The first sentence of section 254(d) authorizes the Commission to impose universal service contributions requirements on telecommunications carriers and, indeed, goes even further to require [e]very telecommunications carrier that provides interstate telecommunications services to contribute. 47 U.S.C. 254(d). 17

18 59. Below, we first adopt three bright-line rules banning blocking, throttling, and paid prioritization, and make clear the no-unreasonable interference/disadvantage standard by which the Commission will evaluate other practices, according to their facts. These rules are grounded in multiple sources of statutory authority, including section 706 and Titles II and III of the Communications Act. Second, based on a current factual record, we reclassify broadband Internet access service as a telecommunications service under Title II. And, third, guided by our goals of more, better, and open broadband, we exercise our forbearance authority to put in place a light touch Title II regulatory framework that protects consumers and innovators, without deterring investment. III. REPORT AND ORDER ON REMAND: PROTECTING AND PROMOTING THE OPEN INTERNET A. History of Openness Regulation 60. These rules are the latest in a long line of actions by the Commission to ensure that American communications networks develop in ways that foster economic competition, technological innovation, and free expression. Ever since the landmark 1968 Carterfone decision, 56 the Commission has recognized that communications networks are most vibrant, and best able to serve the public interest, when consumers are empowered to make their own decisions about how networks are to be accessed and utilized. Openness regulation aimed at safeguarding consumer choice has therefore been a hallmark of Commission policy for over forty years. 61. In Carterfone, the Commission confronted AT&T s practice of preventing consumers from attaching any equipment not supplied by AT&T to their home telephones, even if the attachment did not put the underlying network at risk. 57 Finding AT&T s foreign attachment provisions unreasonable and unlawful, the Commission ruled that AT&T customers had the right to connect useful devices of their choosing to their home telephones, provided these devices did not adversely affect the telephone network Carterfone and subsequent regulatory actions by the Commission severed the market for customer premises equipment (CPE) from that for telephone service. 59 In doing so, the Commission allowed new participants and new ideas into the market, setting the stage for a wave of innovation that 56 Carterfone, 13 FCC 2d Carterfone, 13 FCC 2d at 421, 427. These foreign attachment provisions effectively allowed the company to extend its monopoly over phone service to the telephone equipment market as well. After AT&T prohibited use of the Carterfone, the product s manufacturer brought an antitrust action against AT&T and certain other telephone companies. The district court, applying the doctrine of primary jurisdiction, asked the Commission to determine the reasonableness and validity of the tariff and telephone companies practices. The manufacturer also filed a formal complaint against certain of the telephone companies, and the Commission consolidated the two proceedings. Id. at Carterfone, 13 FCC 2d at ( [O]ur conclusion here is that a customer desiring to use an interconnecting device... should be able to do so, so long as the interconnection does not adversely affect the telephone company's operations or the telephone system s utility for others. ). 59 As the Commission implicitly recognized, allowing AT&T to preclude adoption of even non-harmful third-party devices forestalled the development of a competitive telephone technology market, harming innovators and consumers alike. See id. at 424 ( No one entity need provide all interconnection equipment for our telephone system any more than a single source is needed to supply the parts for a space probe. ); Amendment of Section of the Commission s Rules and Regulations (Second Computer Inquiry), Docket No , Final Decision, 77 FCC 2d 384, 439 para. 141 (1980) (Computer II). 18

19 produced technologies such as the answering machine, fax machine, and modem thereby removing a barrier to the development of the packet switched network that would eventually become the Internet Commitment to robust competition and open networks defined Commission policy at the outset of the digital revolution as well. In a series of influential decisions, known collectively as the Computer Inquiries, 61 the Commission established a flexible regulatory framework to support development of the nascent information economy. The Computer Inquiries decisions separated the market for information services from the underlying network infrastructure, and imposed firm nondiscrimination rules for network access. 62 This system prevented network owners from engaging in anticompetitive behavior and spurred the development and adoption of new technologies The principles of open access, competition, and consumer choice embodied in Carterfone and the Computer Inquires have continued to guide Commission policy in the Internet era. As former Chairman Michael Powell noted in 2004, ensuring that consumers can obtain and use the content, applications and devices they want... is critical to unlocking the vast potential of the broadband Internet. 64 In recognition of this fact, in 2005, the Commission unanimously approved the Internet Policy Statement, which laid out four guiding principles designed to encourage broadband deployment and preserve and promote the open and interconnected nature of the Internet. 65 These principles sought to ensure that consumers had the right to access and use the lawful content, applications, and devices of their choice online, and to do so in an Internet ecosystem defined by competitive markets Michael T. Hoeker, Comment, From Carterfone to the iphone: Consumer Choice in the Wireless Telecommunications Marketplace, 17 CommLaw Conspectus 187, (2008); Kevin Werbach, The Federal Computer Commission, 84 N.C. L. Rev. 1, (2005) (The Federal Computer Commission). 61 Regulatory & Policy Problems Presented by the Interdependence of Computer & Commc'n Servs. & Facilities, Docket No , Final Decision and Order, 28 FCC 2d 267 (1971) (Computer I); Computer II, 77 FCC 2d 384; Amendment of Sections of the Commission s Rules and Regulations (Third Computer Inquiry); and Policy and Rules Concerning Rates for Competitive Common Carrier Services and Facilities Authorizations Thereof Communications Protocols under Section of the Commission s Rules and Regulations, CC Docket No , Report and Order, 104 FCC 2d 958 (1986) (Computer III). 62 The Federal Computer Commission at 22-26; James B. Speta, A Common Carrier Approach to Internet Interconnection, 54 Fed. Comm. L.J. 225, (2002). 63 Robert Cannon, The Legacy of the Federal Communications Commission s Computer Inquiries, 55 Fed. Comm. L.J. 167, 169, (2003) (arguing that the rules established in the Computer Inquiries have been wildly successful and were a necessary precondition for the success of the Internet ). 64 Michael K. Powell, Chairman, Federal Communications Commission, Preserving Internet Freedom: Guiding Principles for the Industry 3, Remarks at the Silicon Flatirons Symposium (Feb. 8, 2004), 65 Appropriate Framework for Broadband Access to the Internet over Wireline Facilities; Review of Regulatory Requirements for Incumbent LEC Broadband Telecommunications Services; Computer III Further Remand Proceedings: Bell Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review-Review of Computer III and ONA Safeguards and Requirements; Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities Internet Over Cable Declaratory Ruling; Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable Facilities, GN Docket No , CC Docket Nos , 01-33, 98-10, 95-20, CS Docket No , Policy Statement, 20 FCC Rcd 14986, , para. 4 (2005) (Internet Policy Statement). 66 Subject to reasonable network management, the principles were intended to ensure consumers had the right to (1) access the lawful Internet content of their choice; (2) run applications and use services of their choice; (3) connect their choice of legal devices that do not harm the network; and (4) enjoy competition among network providers, application and service providers, and content providers. Internet Policy Statement, 20 FCC Rcd at , para

21 separate alternative legal frameworks for classifying and regulating broadband Internet service: (1) as an information service, (2) as a telecommunications service to which all the requirements of Title II of the Communications Act would apply, and (3) solely as to the Internet connectivity service, as a telecommunications service with forbearance from most Title II obligations. 72 The Notice of Inquiry sought comment on both wired and wireless broadband Internet services, as well as on other factual and legal issues specific to... wireless services that bear on their appropriate classification In December 2010, the Commission adopted the Open Internet Order, 74 a codification of the policy principles contained in the Internet Policy Statement. The Open Internet Order was based on broadly accepted Internet norms and the Commission s long regulatory experience in preserving open and dynamic communications networks. 75 The Order adopted three fundamental rules governing Internet service providers: (1) no blocking; (2) no unreasonable discrimination; and (3) transparency. 76 The noblocking rule and no-unreasonable discrimination rules prevented broadband service providers from deliberately interfering with consumers access to lawful content, applications, and services, while the transparency rule promoted informed consumer choice by requiring disclosure by service providers of critical information relating to network management practices, performance, and terms of service The antidiscrimination rule contained in the Open Internet Order operated on a case-bycase basis, with the Commission evaluating the conduct of fixed broadband service providers based on a number of factors, including conformity with industry best practices, harm to competing services or end users, and impairment of free expression. 78 This no unreasonable discrimination framework applied to commercial agreements between fixed broadband service providers and third parties to prioritize transmission of certain traffic to their subscribers. 79 The Open Internet Order also specifically addressed paid prioritization arrangements. 80 It did not entirely rule out the possibility of such agreements, but made clear that such pay for priority deals and the associated paid prioritization network practices were likely to be problematic in a number of respects. Paid prioritization represented a significant departure from historical and current practice that threatened great harm to innovation online, particularly in connection with the market for new services by edge providers. 81 Paid priority agreements were also viewed as a threat to non-commercial end users, including individual bloggers, libraries, schools, advocacy organizations, and other speakers who would be less able to pay for priority service. 82 Finally, paid prioritization was seen giving fixed broadband providers an incentive to limit the quality of service provided to non-prioritized traffic. 83 As a result of these concerns, the Commission explicitly stated in the Open Internet Order that it was unlikely that pay for priority would satisfy the no unreasonable discrimination standard Id. at 7867, para Id Open Internet Order, 25 FCC Rcd Id. at 17906, para. 1; 2014 Open Internet NPRM, 29 FCC Rcd at 5568, para Open Internet Order, 25 FCC Rcd at 17906, para Id. 78 Id. at 17946, paras Id. at 17947, para See infra Section III.C.1.c. 81 Id. 82 Id. 83 Id. 84 Id. 21

22 69. In order to maintain flexibility, the Commission tailored the rules contained in the Open Internet Order to fit the technical and economic realities of the broadband ecosystem. To this end, the restrictions on blocking and discrimination were made subject to an exception for reasonable network management, allowing service providers the freedom to address legitimate needs such as avoiding network congestion and combating harmful or illegal content. 85 Additionally, in order to account for then-perceived differences between the fixed and mobile broadband markets, the Open Internet Order exempted mobile service providers from the anti-discrimination rule, and only barred mobile providers from blocking consumers from accessing lawful websites or applications that compete with the provider s voice or video telephony services. 86 Lastly, the Open Internet Order made clear that the rules did not prohibit broadband providers from offering specialized services such as VoIP; instead, the Commission announced that it would continue to monitor such arrangements to ensure that they did not pose a threat to Internet openness Verizon subsequently challenged the Open Internet Order in the U.S. Court of Appeals for the D.C. Circuit, arguing, among other things, that the Open Internet Order exceeded the Commission s regulatory authority and violated the Act. 88 In January 2014, the D.C. Circuit upheld the Commission s determination that section 706 of the Telecommunications Act of 1996 granted the Commission authority to regulate broadband Internet service providers, 89 and that the Commission had demonstrated a sound policy justification for the Open Internet Order. Specifically, the court sustained the Commission s findings that absent rules such as those set forth in the Open Internet Order, broadband providers represent a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment Despite upholding the Commission s authority and the basic rationale supporting the Open Internet Order, the court struck down the no-blocking and antidiscrimination rules as at odds with section 3(51) of the Communications Act, holding that it prohibits the Commission from exercising its section 706 authority to impose common carrier regulation on a service not classified as a telecommunications service, and section 332(c)(2), which prohibits common carrier treatment of private mobile services. 91 The D.C. Circuit vacated the no-blocking and antidiscrimination rules because it found that they impermissibly regulated fixed broadband providers as common carriers, 92 which conflicted with the Commission s prior classification of fixed broadband Internet access service as an information service rather than a telecommunications service. 93 Likewise, the court found that the C.F.R Id Open Internet Order, 25 FCC Rcd at 17928, para. 30, 17966, para Verizon, 740 F.3d Id. at Id. at Id. at Common carriage, which applies to certain entities like telephone service providers, imposes restrictions on the degree to which a service provider can enter into individualized agreements with similarlysituated customers. Id. at Verizon, 740 F.3d at (vacating the Commission s rule prohibiting unreasonable discrimination by fixed broadband providers on the theory that it so limited broadband providers control over edge providers transmissions that [it] constitute[d] common carriage per se and finding that the no-blocking rules would appear on their face to impose common carrier obligations on fixed and mobile broadband providers); see also 2014 Open Internet NPRM, 29 FCC Rcd at , para Verizon, 740 F.3d at 650; see also United Power Line Council s Petition for Declaratory Ruling Regarding the Classification of Broadband over Power Line Internet Access Service as an Information Service, WC Docket No , Memorandum Opinion and Order, 21 FCC Rcd (2006) (BPL-Enabled Broadband Order); Appropriate Framework for Broadband Access to the Internet over Wireline Facilities; Universal Service Obligations of (continued.) 22

23 no-blocking rule as applied to mobile broadband conflicted with the Commission s earlier classification of mobile broadband service as a private mobile service rather than a commercial mobile service. 94 The Verizon court held that the no unreasonable discrimination standard adopted in the Open Internet Order was insufficiently distinguishable from the nondiscrimination standard applicable to common carriers. 95 Central to the court s rationale was its finding that, as formulated in the Open Internet Order, both rules improperly limited fixed broadband Internet access providers ability to engage in individualized bargaining Following the D.C. Circuit s ruling, on May 15, 2014 the Commission issued a Notice of Proposed Rulemaking (2014 Open Internet NPRM) to respond to the lack of conduct-based rules to protect and promote an open Internet following the D.C. Circuit s opinion in Verizon v. FCC. 97 The Commission began the NPRM with a fundamental question: What is the right public policy to ensure that the Internet remains open? 98 While the NPRM put forth various proposals, it sought broad comment on alternative paths to the right public policy solution including areas such as the proper scope of the rules; the best ways to define, prevent, and treat violations of practices that may threaten an open Internet (including paid prioritization); enhancements to the transparency rule; and the appropriate source of legal authority to support new open Internet rules The Commission took many steps to facilitate public engagement in response to the 2014 Open Internet NPRM including the establishment of a dedicated address to receive comments, a mechanism for submitting large numbers of comments in bulk via a Comma Separated Values (CSV) file, (Continued from previous page) Broadband Providers; Review of Regulatory Requirements for Incumbent LEC Broadband Telecommunications Services; Computer III Further Remand Proceedings: Bell Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review Review of Computer III and ONA Safeguards and Requirements; Conditional Petition of the Verizon Telephone Companies for Forbearance Under 47 U.S.C. 160(c) with Regard to Broadband Services Provided via Fiber to the Premises; Petition of the Verizon Telephone Companies for Declaratory Ruling or, Alternatively, for Interim Waiver with Regard to Broadband Services Provided via Fiber to the Premises; Consumer Protection in the Broadband Era, WC Docket Nos , , Report and Order and Notice of Proposed Rulemaking, 20 FCC Rcd 14853, 14855, para. 1 (2005) (Wireline Broadband Classification Order); Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities; Internet Over Cable Declaratory Ruling; Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable Facilities, GN Docket No , CS Docket No , Declaratory Ruling and Notice of Proposed Rulemaking, 17 FCC Rcd 4798, 4801, para. 4 (2002) (Cable Modem Declaratory Ruling), aff d, Nat l Cable & Telecomms. Ass n v. Brand X Internet Servs., 545 U.S. 967 (2005). 94 Verizon, 740 F.3d at 650; Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks, WT Docket No , Declaratory Ruling, 22 FCC Rcd 5901 (2007) (Wireless Broadband Classification Order). 95 Verizon, 740 F.3d at In making its determination, the Verizon court relied on a previous decision in which it upheld the Commission s data roaming requirements against a common carrier challenge. Cellco P'ship v. FCC, 700 F.3d 534 (D.C. Cir. 2012). The Verizon court emphasized that, unlike the data roaming rules at issue in Cellco, which explicitly left room for individualized negotiations, the Open Internet Order did not attempt to ensure that [the] reasonableness standard remains flexible. Cellco, 700 F.3d at 548; Verizon, 740 F.3d at See generally 2014 Open Internet NPRM, 29 FCC Rcd Id. at 5563, para Id. at 5563, para 4. The Commission proposed to retain the definitions and scope of the 2010 rules, adopting the text of the 2010 no-blocking rule under a revised rationale, and enhancing the transparency rule that remained in place after Verizon. Id. at , para. 10. The 2014 Open Internet NPRM also proposed to add a separate layer of protection against anti-competitive conduct by service providers that would otherwise be permissible under the no-blocking rule. This new rule would require that service providers adhere to an enforceable legal standard of commercially reasonable practices in the provision of broadband Internet access service. Id. 23

24 and the release of the entire record of comments and reply comments as Open Data in a machine-readable format, so that researchers, journalists, and other parties could analyze and create visualizations of the record. 100 In addition, Commission staff hosted a series of roundtables covering a variety of topics related to the open Internet proceeding, including events focused on different policy approaches to protecting the open Internet, 101 mobile broadband, 102 enforcement issues, 103 technology, 104 broadband economics, 105 and the legal issues surrounding the Commission s proposals The public seized on these opportunities to comment, submitting an unprecedented 3.7 million comments by the close of the reply comment period on September 15, 2014, with more submissions arriving after that date. 107 This record-setting level of public engagement reflects the vital nature of Internet openness and the importance of our getting the answer right in this proceeding. Quantitative analysis of the comment pool reveals a number of key insights. For example, by some estimates, nearly half of all comments received by the Commission were unique. 108 While there has been some public dispute as to the percentage of comments taking one position or another, it is clear that the 100 Dr. David A. Bray, FCC Chief Information Officer, Official FCC Blog, An Update on the Volume of Open Internet Comments Submitted to the FCC (Sept. 17, 2014), Dr. David A. Bray, FCC Chief Information Officer, Official FCC Blog, An Additional Option for Filing Open Internet Comments (Sept. 11, 2014), Gigi B. Sohn, Special Counsel for External Affairs, Office of the Chairman, Official FCC Blog, FCC Makes Open Internet Comments More Accessible to Public (August 5, 2014), Open Internet Roundtable, Policy Approaches to Ensure an Open Internet, Sept. 16, 2014 (recording available at Open Internet Roundtable, Mobile Broadband and the Open Internet, Sept. 16, 2014 (recording available at Open Internet Roundtable, Effective Enforcement of Open Internet Requirements, Sept. 19, 2014 (recording available at Open Internet Roundtable, Technological Aspects of an Open Internet, Sept. 19, 2014 (recording available at Open Internet Roundtable, Economics of Broadband: Market Successes and Market Failures, Oct.2, 2014 (recording available at Open Internet Roundtable, Internet Openness and the Law, Oct. 7, 2014 (recording available at Gigi B. Sohn, Special Counsel for External Affairs, Office of the Chairman, Official FCC Blog, FCC Releases Open Internet Reply Comments to the Public (Oct. 22, 2014, updated Dec. 23, 2014), In order to accommodate this unprecedented level of public involvement, both the comment and reply comment periods were extended via public notice. See Wireline Competition Bureau Will Treat as Timely Filed Any Comments Filed in Response to the Open Internet Notice of Proposed Rulemaking and the Framework for Broadband Internet Access Service Refreshing the Record Public Notice if Filed by July 18, 2014, GN Docket Nos , 14-28, Public Notice, 29 FCC Rcd 8335 (Wireline Comp. Bur. 2014); Wireline Competition Bureau Extends Deadline for Filing Reply Comments in the Open Internet and Framework for Broadband Internet Service Proceedings, GN Docket Nos , , Public Notice, 29 FCC Rcd 9714 (Wireline Comp. Bur. 2014). 108 Knight Foundation, Decoding the Net Neutrality Debate at 14 (2014), (Knight Foundation, Decoding the Net Neutrality Debate); see also Bob Lannon & Andrew Pendleton, What Can We Learn From 800,000 Public Comments on the FCC's Net Neutrality Plan? (Sept. 2, 2014), public-comments-on-the-fccs-net-neutrality-plan/. 24

25 majority of comments support Commission action to protect the open Internet. 109 Comments regarding the continuing need for open Internet rules, their legal basis, and their substance formed the core of the overall body of comments. In particular, support for the reclassification of broadband Internet access under Title II, opposition to fast lanes and paid prioritization, and unease regarding the market power of broadband Internet access service providers were themes frequently addressed by commenters. 110 In offering this summary, we do not mean to overlook the diversity of views reflected in the impressively large record in this proceeding. Most of all, we are grateful to the public for using the power of the open Internet to guide us in determining how best to protect it. B. The Continuing Need for Open Internet Protections 75. In its remand of the Commission s Open Internet Order, the D.C. Circuit affirmed the underlying basis for the Commission s open Internet rules, holding that the Commission [had] more than adequately supported and explained its conclusion that edge provider innovation leads to the expansion and improvement of broadband infrastructure. 111 The court also found reasonable and grounded in substantial evidence the Commission s finding that Internet openness fosters the edge provider innovation that drives the virtuous cycle. 112 The record on remand continues to convince us that broadband providers including mobile broadband providers have the incentives and ability to engage in practices that pose a threat to Internet openness, and as such, rules to protect the open nature of the Internet remain necessary. Today we take steps to ensure that the substantial benefits of Internet openness continue to be realized. 1. An Open Internet Promotes Innovation, Competition, Free Expression, and Infrastructure Deployment 76. In the 2014 Open Internet NPRM, we sought comment on and expressed our continued commitment to an important principle underlying the Commission s prior policies that the Internet s openness promotes innovation, investment, competition, free expression, and other national broadband goals. 113 The record before us convinces us that these findings, made by the Commission in 2010 and upheld by the D.C. Circuit, remain valid. If anything, the remarkable increases in investment and innovation seen in recent years while the rules were in place bear out the Commission s view. 114 For 109 An initial analysis of 800,000 comments performed by the Sunlight Foundation estimated that less than 1 percent of comments were clearly opposed to net neutrality. Bob Lannon & Andrew Pendleton, What Can We Learn From 800,000 Public Comments on the FCC's Net Neutrality Plan? (Sept. 2, 2014), A subsequent study of reply comments found that [n]on-form-letter submissions had a similar sentiment distribution as comments in the first round, at less than 1% opposed to net neutrality. Andrew Pendleton & Bob Lannon, One Group Dominates the Second Round of Net Neutrality Comments (Dec. 16, 2014), Knight Foundation, Decoding the Net Neutrality Debate at Verizon, 740 F.3d at Id Open Internet NPRM, 29 FCC Rcd at 5570, para See, e.g., AARP Comments at 9 (explaining that pro-innovation and pro-competition regulatory certainty is needed to protect the exponential economic growth and economic benefits enabled by the Internet); Bright House Networks (Bright House) Comments at 1-2 (discussing the positive trend in investment and enhancement of Internet access services and competitive choices that took place under the prior open Internet rules); Communications Workers of America & National Association for the Advancement of Colored People (CWA & NAACP) Comments at 4 ( The virtuous circle... has led to nearly $230 billion in capital expenditures by the leading network and edge providers over the three-year period since the Open Internet Order took effect (2011 to 2013). Network providers were responsible for a full 84 percent of these capital expenditures, or $193 billion. ); Internet Innovation Alliance (continued.) 25

26 example, in addition to broadband infrastructure investment, 115 there has been substantial growth in the digital app economy, video over broadband, and VoIP, as well as a rise in mobile e-commerce. 116 Overall Internet adoption has also increased since Both within the network and at its edges, investment and innovation have flourished while the open Internet rules were in force. (Continued from previous page) Reply at 7 (explaining that private capital investment in broadband networks has also grown under the open Internet rules); Online Publishers Association Comments at 3-4 ( For content innovation to continue flourishing online... the Commission should, consistent with the 2010 Open Internet Order, adopt open Internet principles that continue to encourage investment and innovation in content creation.... ). 115 In the 2015 Broadband Progress Report, the Commission explained that [b]roadband networks continue to grow due to significant investments by private industry. Some reports indicate that broadband providers invest tens of billions of dollars each year to further extend the reach of their networks, with providers spending a total $1.3 trillion since 1996 and $75 billion in 2013 alone Broadband Progress Report at para Additionally, the Commission noted that [f]rom December 2011 to December 2013, Americans without access to a fixed 25 Mbps/3 Mbps broadband service or higher declined approximately 11 percentage points for the United States as a whole, declined 12 percentage points in rural areas, and declined 11 percentage points in urban areas. Id. at para. 84. See also, e.g., AT&T Comments at 9 ( U.S. investment in broadband networks shows no signs of slowing: USTelecom reports that broadband capital expenditures rose from $64 billion in 2009 to $68 billion in AT&T has [devoted] more than $20 billion annually to capital investment. ); CenturyLink Comments at 4-5 (stating that AT&T, Verizon, and CenturyLink, alone, report annual capital investment (of which the vast majority is for broadband network build-out) over the last three years in the approximate average amounts of $20 billion, $16 billion, and $3 billion, respectively. On the cable side, Comcast, Time Warner and Charter report annual broadband network investment of approximate average amounts of $5 billion, $3 billion, and $2 billion, respectively, over this same time period.... Moreover, a University of Pennsylvania report shows that per capita network investment in the United States is more than twice that of Europe. ); NCTA Comments at 7-8 ( Broadband providers in the U.S. have invested an astounding $1.2 trillion in private capital since 1996 to develop and deploy advanced broadband networks. Over the past two decades, the broadband industry has invested an average of $70 billion a year in our nation s wired and wireless broadband networks. And this investment is only accelerating; in fact, since 2012, broadband providers in the United States have laid more high-speed fiber cables than in any similar period since ); Public Knowledge Comments at 25 ( [I]n June 2013, the number of [wireless] connections with downstream speeds of at least 10 Mbps increased by 118% over June 2012, to 103 million connections, including 45 million mobile connections. The most recent FCC data on Internet access service shows that the number of mobile Internet subscription connections with speeds over 200 kbps in at least one direction increased by 18% year over year to 181 million. ). 116 See, e.g., Internet Innovation Alliance Reply at 7; Iridescent Networks Comments at 5 (explaining that [t]he spread of mobile broadband and the extensive usage on the mobile networks is increasing at incredibly accelerating rates ); Massachusetts Department of Telecommunications and Cable (MDTC) Comments at 2 (noting that according to the Census Bureau of the U.S. Department of Commerce, there was an estimated $71.2 billion dollars in retail e-commerce sales in the first quarter of 2014 ); Roku Comments at iv, 3 & n.3 (stating that Internet video traffic [was] estimated at 66 percent of all traffic in 2013 and expected to rise to nearly 79 percent in just four years and that the number of Americans that most often stream shows is up three percent since 2012, and that nearly a quarter of Americans say that they watch more streaming television than they did a year ago ); Telecommunications Industry Association (TIA) Comments at 8 (Regarding VoIP, the number of residential VoIP subscribers through cable [rose] 10.1 percent in 2013 to 25 million. The non-cable VoIP market more than doubled between 2009 and The overall residential VoIP market will increase from 35.9 million subscribers in 2013 to 46.8 million in ); Writers Guild of America, West (WGAW) Comments at 6 ( The number of online videos viewed each month by Americans has increased from 7.2 billion in January of 2007 to 52.4 billion in December of Meanwhile, the segment of Americans who watch or download videos has grown from 69% of adult internet users in 2009 to 78% in ). 117 See, e.g., Internet Innovation Alliance Reply at 7 ( In January, the well-respected Pew Center noted that 87 percent of Americans now use the Internet, up 8 percent from 2010, marking another explosive adoption of Internet usage. ) (citing Susannah Fox and Lee Rainie, The Web at 25 in the U.S. 4, Pew Research Internet Project (2014)); see also 2015 Broadband Progress Report at para. 92 (explaining that from December 31, 2011 to December 31, 2013 [a]doption grew 23 percentage points for fixed 25 Mbps/3 Mbps broadband service or higher (continued.) 26

27 77. The record before us also overwhelmingly supports the proposition that the Internet s openness is critical to its ability to serve as a platform for speech and civic engagement, 118 and that it can help close the digital divide by facilitating the development of diverse content, applications, and services. 119 The record also supports the proposition that the Internet s openness continues to enable a virtuous [cycle] of innovation in which new uses of the network including new content, applications, services, and devices lead to increased end-user demand for broadband, which drives network improvements, which in turn lead to further innovative network uses. 120 End users experienced the benefits of Internet openness that stemmed from the Commission s 2010 open Internet rules increased consumer choice, freedom of expression, and innovation. 121 (Continued from previous page) (7 percent to 30 percent), 20 percentage points for fixed 3 Mbps/768 kbps service or higher (45 percent to 65 percent) and 6 percentage points for fixed 768 kbps/200 kbps service or higher (68 percent to 74 percent) ). 118 See, e.g., Asian Americans Advancing Justice (AAJC ) Comments at 1-2 (explaining that a free and open Internet is critical for a variety of reasons including: level[ing] the playing field for free speech, including for small and marginalized communities [and] empower[ing] our community to organize politically and promote civic engagement ); American Civil Liberties Union (ACLU) Comments at 2 (arguing that [t]he equitable provision of high quality access to a free and open Internet, and especially the closing of the digital divide, represents one of the most important free speech challenges of the information age. As information technology advances apace, the meaningful exercise of our constitutional rights including the freedoms of speech, assembly, press and the right to petition government has become literally dependent on broadband internet access ); Open Media and Information Companies Initiative (Open MIC) Comments at 3 (noting that Open Internet principles also promote free speech, civic participation, democratic engagement and marketplace competition, as well as robust broadband adoption and participation in the Internet community by minorities and other socially and economically disadvantaged groups ). 119 See, e.g., AOL Comments at 2 (explaining that [t]he Internet s openness has fostered innovation and investment both in advancements in network deployment and the services that ride upon them creating... a virtuous circle, where richer and more diverse content on the edge jump-starts demand, which brings about infrastructure investment, which brings about even richer and more diverse content ); CWA and NAACP Comments at 1 ( Preserving an open and free Internet consistent with the need to promote job-creating investment and closing the digital divide in our nation s high speed networks is critical to safeguard our nation s economic, social, and democratic fabric and future. ); European Digital Rights Comments at 2 (warning that [a]n end to net neutrality in the USA will come at severe costs to innovation and competition, privacy and freedom of communication ); Online Publishers Association Comments at 3-4 ( For content innovation to continue flourishing online... and for broadband to serve more social objective[s], the Commission should adopt open Internet principles that continue to encourage investment and innovation in content creation, and ensure that the Internet is an open platform that supports consumer choice and the open exchange of ideas and information. ). 120 See 2010 Open Internet Order, 25 FCC Rcd at , para. 14. See also, e.g., Common Cause Comments at 2 (noting that [i]ncreased broadband adoption and new service offerings demonstrate that Open Internet protections foster the virtuous circle of innovation, generating both consumption and new discourse, driving additional investment and yet more creative applications ); Comcast Comments at 2 (explaining that substantial benefits such as economic growth, innovation, competition, free expression, and broadband investment and deployment are closely tied to the Internet s openness, which enables a virtuous circle of innovation ); Higher Education and Libraries Comments at 5 (explaining that Internet openness is an essential driver of the virtuous circle, and [t]he unimpeded flow of knowledge, information, and interaction across the Internet enables the circle of innovation, user demand, and subsequent broadband expansion that have generated the dramatic social, cultural, and economic benefits acknowledged by the Commission, the courts, and the nation as a whole ); Online Publishers Association Comments at 1 ( An open Internet enables innovators to create and offer new content, applications and services, and it allows development and distribution of new technologies by a broad range of sources, including broadband providers that operate the network. ); WTA Advocates for Rural Broadband (WTA) Comments at 1 (arguing that Internet openness will be promoted and enhanced as service providers are encouraged and enabled to invest in the deployment of higher and higher broadband capacities that enable their customers to obtain faster and more affordable access to new content, applications and services ) Open Internet NPRM, 29 FCC Rcd at 5570, para. 25; see also, e.g., ACLU Comments at 2 ( The equitable provision of high quality access to a free and open internet, and especially the closing of the digital divide, (continued.) 27

28 2. Broadband Providers Have the Incentive and Ability to Limit Openness 78. Broadband providers function as gatekeepers for both their end user customers who access the Internet, and for various transit providers, CDNs, and edge providers attempting to reach the broadband provider s end-user subscribers. 122 As discussed in more detail below, broadband providers (including mobile broadband providers) have the economic incentives and technical ability to engage in practices that pose a threat to Internet openness by harming other network providers, edge providers, and end users. a. Economic Incentives and Ability 79. In the 2014 Open Internet NPRM, we sought to update the record with information about new and continuing incentives for broadband providers to limit Internet openness. As explained in detail in the Open Internet Order, broadband providers not only have the incentive and ability to limit openness, but they had done so in the past. 123 The D.C. Circuit found that the Commission adequately supported and explained that, absent open Internet rules, broadband providers represent a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment. 124 The record generated in this proceeding convinces us that the Commission s conclusion in the Open Internet Order that providers of broadband have a variety of strong incentives to limit Internet openness remains valid today. (Continued from previous page) represents one of the most important free speech challenges of the information age. As information technology advances apace, the meaningful exercise of our constitutional rights- including the freedoms of speech, assembly, press and the right to petition government has become literally dependent on broadband internet access. ); Al Franken, Edward J. Markey, Bernie Sanders, Ben Cardin, Sheldon Whitehouse, Cory Booker, Kirsten Gillibrand, Charles E. Schumer, Richard Blumenthal, Elizabeth Warren, and Ron Wyden (US Senators) Comments at 1 ( An open Internet has become the world s most successful platform for innovation, job-creation and entrepreneurialism. An open Internet enables freedom of expression and the sharing of ideas around the world. An open Internet is driving economic growth throughout the United States. ); Comcast Comments at 2 (explaining that substantial benefits such as economic growth, innovation, competition, free expression, and broadband investment and deployment are closely tied to the Internet s openness, which enables a virtuous circle of innovation ); Electronic Frontier Foundation (EFF) Comments at 1 ( An open, neutral, and fast Internet has helped spark an explosion of free expression, innovation, and political change. ). 122 See, e.g., COMPTEL Comments at 2-3 (explaining that broadband providers serve as gatekeepers to transit providers and CDNs that deliver content to the broadband providers end users); Open Technology Institute at the New America Foundation and Benton Foundation (OTI) Comments at 11 ( [V]ertical integration, which provides greater incentive to block competitors, and... increasing horizontal consolidation,... increases the power of large ISPs and their resulting leverage as gatekeepers. ); Smithwick & Belendiuk Comments at 2 ( A handful of gatekeepers, the Internet Service Providers ( ISPs ), control access to broadband customers. ); Vonage Comments at 16 (stating that concentration in the broadband market exacerbates broadband providers ability to act as gatekeepers and their natural incentive to favor their own services over competitive edge services ). 123 See 2010 Open Internet Order, 25 FCC Rcd at , paras As the Commission explained in the Open Internet Order, examples such as the Madison River case, the Comcast-Bit Torrent case, and various mobile wireless Internet providers restricting customers use of competitive payment applications, competitive voice applications, and remote video applications, indicate that broadband providers have the technical ability to act on incentives to harm the open Internet. Id. at 17925, para. 35 & n.107. The D.C. Circuit also found that these examples buttressed the Commission s conclusion that broadband providers incentives and ability to restrict Internet traffic could interfere with the Internet s openness. Verizon, 740 F.3d at See also, e.g., EFF Comments at 23 (noting that AT&T blocked Apple s FaceTime iphone and ipad applications over AT&T s mobile data network in 2012); WGAW Comments at 14 (describing the situation where Comcast exempted its own online video service from data caps when streamed to an Xbox). It is not surprising that, during a decade in which the Commission vowed to keep the Internet open, that Commission policy served as a deterrent to additional bad acts. 124 Verizon, 740 F.3d at

29 80. Broadband providers networks serve as platforms for Internet ecosystem participants to communicate, enabling broadband providers to impose barriers to end-user access to the Internet on one hand, and to edge provider access to broadband subscribers on the other. This applies to both fixed and mobile broadband providers. Although there is some disagreement among commenters, the record provides substantial evidence that broadband providers have significant bargaining power in negotiations with edge providers and intermediaries that depend on access to their networks because of their ability to control the flow of traffic into and on their networks. 125 Another way to describe this significant bargaining power is in terms of a broadband provider s position as gatekeeper that is, regardless of the competition in the local market for broadband Internet access, once a consumer chooses a broadband provider, that provider has a monopoly on access to the subscriber. 126 Many parties demonstrated that both mobile and fixed broadband providers are in a position to function as a gatekeeper with respect to edge providers. 127 Once the broadband provider is the sole provider of access to an end user, this can influence that network s interactions with edge providers, end users, and others. As the Commission and the court have recognized, broadband providers are in a position to act as a gatekeeper between end users access to edge providers applications, services, and devices and reciprocally for edge providers access to end users. Broadband providers can exploit this role by acting in ways that may harm the open Internet, such as preferring their own or affiliated content, demanding fees from edge providers, or placing technical barriers to reaching end users. 128 Without multiple, substitutable paths to the consumer, 125 See, e.g., Internet Association Comments at 13 ( Broadband Internet access providers have long had the ability to engineer choke points into their networks in order to slow traffic from certain sources. Advances in network technologies, however, have provided them with an unprecedented ability to discriminate among sources and types of Internet traffic in real time and with little cost. ); Roku Comments at 14 (explaining that market power of broadband providers allows them to favor certain content with faster delivery or higher performance); AARP Comments at 47 ( The market power possessed by broadband providers in retail markets for broadband Internet access also translates into market power with regard to edge providers who need to reach their subscribers/users. ); Consumer Federation of America (CFA) Comments at 3 ( Competition is much weaker in the network segment of the digital platform than in the edge segments, which means network owners face less pressure to innovate; have the ability to influence industrial structure to favor their interests at the expense of the public interest; can use vertical leverage (where they are integrated) to gain competitive advantage over independent edge entrepreneurs; and have the ability to extract rents, where they possess market power or where switching costs are high. ). We are not persuaded by arguments to the contrary, as explained infra. But see AT&T Comments at 18 ( [T]he Commission appears to misunderstand the technical capabilities of broadband Internet access providers. In particular, the Commission s assumption that providers have the ability to engage in end-to-end prioritization of Internet traffic is incorrect in the vast majority of cases. ); CenturyLink Comments at 11 ( [B]roadband providers are not able to sustain broadband price increases above competitive levels. If they did so, customers would simply choose another option. ). 126 See, e.g., 2014 Open Internet NPRM, 29 FCC Rcd at 5576, para. 42 (citing the 2010 Open Internet Order, 25 FCC Rcd at , para. 34); Ad Hoc Telecommunications Users Committee (Ad Hoc) Comments at 7; Public Knowledge Comments at (arguing that mobile broadband is not a substitute for fixed broadband services, so its increased adoption does not change the essential points about broadband providers position as gatekeepers). 127 See, e.g., Mozilla Comments at 25; COMPTEL Comments at 23; Free Press Comments at 44. But see Letter from Kathleen Grillo, Senior Vice President, Verizon, to Marlene H. Dortch, Secretary, FCC, GN Docket No , Attach. at (filed Jan. 15, 2015) (Verizon Jan.15, 2015 Ex Parte Letter) (arguing that the [gatekeeper] theory does not apply to mobile broadband); Letter from Jonathan Banks, Senior Vice President, Law & Policy, USTelecom, to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 2-3 (filed Feb. 18, 2015) (USTelecom Feb. 18, 2015 Ex Parte Letter) (arguing that the gatekeeper theory is inapplicable to broadband in general because the Commission made its original arguments on this theory in the context of voice services subject to a calling party network pays regime, and reliance on switching costs as a justification was irrelevant to those original findings). 128 See, e.g., Ad Hoc Comments at 8-9 (discussing the incentive of broadband providers to demand paid prioritization fees); Bauer, Clark & Claffy Reply at 4 ( Access ISPs presumptively have market power as a [gatekeeper], and can impose both technical and economic harms as part of a business negotiation, or favor their own higher-level services. ); Microsoft Comments at 10 (explaining that broadband providers can use their power as (continued.) 29

30 and the ability to select the most cost-effective route, edge providers will be subject to the broadband provider s gatekeeper position. 129 The D.C. Circuit noted that the Commission convincingly detailed broadband providers market position, which gives them the economic power to restrict edge-provider traffic and charge for the services they furnish edge providers, and further stated that the Commission reasonably explained that this ability to act as a gatekeeper distinguishes broadband providers from other participants in the Internet marketplace who have no similar control [over] access to the Internet for their subscribers and for anyone wishing to reach those subscribers. 130 The ability of broadband providers to exploit this gatekeeper role could be mitigated if consumers multi-homed (i.e., bought broadband service from multiple networks). However, multi-homing is not widely practiced and imposes significant additional costs on consumers. 131 The gatekeeper role could also be mitigated if a consumer (Continued from previous page) gatekeepers to pressure edge providers into entering such arrangements and demand increasingly higher rates and greater concessions from edge providers over time ); Netflix Comments at 12 (stating that its dispute with Comcast shows how a broadband provider can use its position as gatekeeper to harm edge providers, its own customers, and the virtuous circle by discriminating at interconnection and peering points ); Roku Comments at 8 (noting that preferences for affiliated content pose imminent threats to consumer choice and competition); see also infra Section III.C.1.c; para. 81 (discussing the relationship between switching costs and broadband providers gatekeeper position). 129 See, e.g., Ad Hoc Comments at 13; Bauer, Clark & Claffy Comments at 4 (arguing that one way to limit broadband providers gatekeeper power is to require ISPs to provide adequate means for edge providers and off-net users to reach their customers over interconnection and transit links ). 130 See Verizon,740 F.3d at 646 (quoting 2010 Open Internet Order, 25 FCC Rcd at 17919, 17935, paras. 24, 50). We find, for example, that even though edge providers may possess bargaining power, they do not have the same ability as broadband providers to control the flow of traffic or block access to the Internet. See, e.g., 2010 Open Internet Order, 25 FCC Rcd at 17918, para. 24 & n.66 (explaining that a broadband provider can act as a gatekeeper even if some edge providers would have bargaining power in negotiations with broadband providers over access or prioritization fees). See also infra Section III.F.1-2. We note that Judge Silberman expressed concern over relying on the terminating monopoly and gatekeeper concepts because terminating monopolies are not largely discussed outside of Commission jurisprudence, and [t]he gatekeeper effect is a tool that facilitates the exercise of market power over sellers; it is not market power itself. Verizon, 740 F.3d at 663 & n.7 (Silberman, J., concurring in part and dissenting in part). However, our reliance on these terms for our determinations today focuses on how this unique gatekeeper position of broadband providers in combination with other realities about broadband availability and access affects broadband providers incentives and abilities to harm the open nature of the Internet. As explained further below, the Commission s discussion of these terms is especially important in combination with switching costs and limited retail broadband competition for fixed broadband. With respect to mobile, the presence of some additional retail competition is not enough to alter our conclusion here. See infra Section III.B See, e.g., Ad Hoc Comments at 12 (noting that [a]t this point in time, there is no evidence to suggest that a sizable number of consumers actually procure Internet access service from multiple ISPs simultaneously or that they would be able to switch seamlessly from one ISP to another in order to receive content from a provider imposing restrictions or burdensome charges on edge providers ); Level 3 Comments at 3 ( [T]he largest mass-market retail ISPs stand in a uniquely favorable place in the Internet ecosystem: they control access to several million users who cannot be reached through alternate routing. In Internet terms, these mass-market customers are single-homed, meaning they draw service from a single ISP. This contrasts with enterprise users, who are frequently multihomed, meaning that they can access the Internet through more than one ISP. ). But see Layton Reply at (arguing that pre-paid mobile services may be purchased in exchange for, or in supplement to, a family broadband plan, which is a form of multi-homing); Verizon Jan. 15, 2015 Ex Parte Letter Attach. at 29 (arguing that customers multi-home when purchasing both mobile wireless and fixed service, allowing consumers to substitute across those providers ). However, many customers view fixed and mobile broadband services as distinct product offerings. See supra para. 9; 2015 Broadband Progress Report at para. 120 ( We recognize that many households subscribe to both fixed and mobile services because they use fixed and mobile services in fundamentally different ways and, as such, view fixed and mobile services as distinct product offerings. ) and Public Knowledge Comments at (arguing that mobile broadband is not a substitute for fixed broadband services, so its increased adoption does not change the essential points about broadband providers position as gatekeepers). 30

31 could easily switch broadband providers. But, as discussed further below, the evidence suggests otherwise. 81. The broadband provider s position as gatekeeper is strengthened by the high switching costs consumers face when seeking a new service. Among the costs that consumers may experience are: high upfront device installation fees; long-term contracts and early termination fees; the activation fee when changing service providers; and compatibility costs of owned equipment not working with the new service. 132 Bundled pricing can also play a role, as single-product subscribers are four times more likely to churn than triple-play subscribers. 133 These costs may limit consumers willingness and ability to switch carriers, if such a choice is indeed available. 134 Commenters also point to an information problem, whereby consumers are unsure about the causes of problems or limitations with their services for example, whether a slow speed on an application is caused by the broadband provider or the edge provider and as such consumers may not feel that switching providers will resolve their Internet access issues. 135 Additionally, consumers on unlimited data plans may be confused by slowed data speeds because broadband providers have not adequately communicated contractually-imposed data management practices and usage thresholds. 136 Switching costs are also a critical factor that negatively impacts mobile broadband consumers, in particular due to the informational uncertainties mentioned below, among other reasons. 137 Ultimately, when consumers face this kind of friction in switching to meaningful competitive 132 See, e.g., Access Comments at 15; Consumers Union Comments at 14; People of the State of Illinois and People of the State of New York (Illinois and New York) Comments at 11; Public Knowledge Comments at Applications of AT&T Inc. and DIRECTV for Consent to Assign or Transfer Control of Licenses and Authorizations, MB Docket No , Katz Decl. at 28, n.57 (filed June 11, 2014) (quoting AT&T internal report). 134 See, e.g., Consumers Union Comments at 14 (referring to a January 2014 Consumer Reports article that reported that high switching costs continue to serve as barriers to customers freely changing carriers ); see also, e.g., ACLU Comments at 4 (explaining that although they present problems in both the mobile and fixed contexts, concentration and consumer lock-in are particularly acute in the fixed broadband market ); EFF Comments at 1 (warning that switching costs and consumer lock-in further undermine the ability of marketplace forces to prevent non-neutral practices ). In the 2015 Broadband Progress Report, the Commission noted that approximately 55 million Americans live in areas unserved by terrestrial-fixed broadband meeting the 25 Mbps/3 Mbps benchmark. In addition, people living in rural and on Tribal lands are disproportionately lacking access to broadband at this increased benchmark speed. Data show that 25 Mbps/3 Mbps is available to 92 percent of Americans living in urban areas, 47 percent of Americans in rural areas, and 37 percent of Americans on Tribal lands Broadband Progress Report at 79. This data suggests that meaningful alternative broadband options may be largely unavailable to many Americans, further limiting the ability to switch providers. Based on the submissions from various commenters, it appears that between 65% and 70% of households have at most two options for high speed Internet access. See, e.g., Common Cause Comments at 2; Access Comments at 14. When we look to the new standard articulated in the 2015 Broadband Progress Report, the data suggest that only 12 percent of households have 3 or more options for 25 Mbps/3 Mbps broadband service; 27 percent of households have two provider options for this service; and 45 percent of households have only single provider option for these services. Approximately 16 percent of households reside in areas without a single provider of fixed broadband services. See 2015 Broadband Progress Report at See, e.g., Cogent Reply at (advocating for enhanced disclosure requirements that would provide customers with information such as performance data for speeds of popular edge-provider content); Utilities Telecom Council Reply at 13 (explaining that the unstructured and open nature of the Internet provides tremendous opportunities for innovation and growth, yet it also prevents end users from fully understanding the current or potential limitations of any particular service offering ). 136 See, e.g., COMPTEL Comments at 18 (explaining that some carriers offering unlimited data plans may need to limit speeds of customers using more than 5GB of data per month); iclick2media Comments at 2 (describing a concern that an end user may pay for one thing and is given something else that is suppose[d] to be comparable but is not i.e. paying for an unlimited plan but throttling the End user[ s] speed down if they reach a certain point ). 137 See infra paras

32 alternatives, it decreases broadband provider responsiveness to consumer demands and limits the provider s incentives to improve their networks. 138 Additionally, 45 percent of households have only a single provider option for 25 Mbps/3 Mbps broadband service, indicating that 45 percent of households do not have any choices to switch to at this critical level of service Broadband providers may seek to gain economic advantages by favoring their own or affiliated content over other third-party sources. 140 Technological advances have given broadband providers the ability to block content in real time, which allows them to act on their financial incentives to do so in order to cut costs or prefer certain types of content. 141 Data caps or allowances, which limit the amount and type of content users access online, can have a role in providing consumers options and differentiating services in the marketplace, but they also can negatively influence customer behavior and the development of new applications. 142 Similarly, broadband providers have incentives to charge for prioritized access to end users or degrade the level of service provided to non-prioritized content. When bandwidth is limited during peak hours, its scarcity can cause reliability and quality concerns, which increases broadband providers ability to charge for prioritization. 143 Such practices could result in socalled tolls for edge providers seeking to reach a broadband provider s subscribers, leading to reduced innovation at the edge, as well as increased rates for end users, reducing consumer demand, and further disrupting the virtuous cycle. 144 Commenters expressed considerable concern regarding the harmful 138 See, e.g., Consumers Union Comments at 13; see also, e.g., ACLU Comments at 5 (arguing that the logical corollary to this incentive and ability is the potential for broadband providers to engage in content-based regulation of edge providers applications, services, devices or programming ) Broadband Progress Report at para See, e.g., Internet Association Comments at 15; Consumers Union Comments at 3 (agreeing that vertically integrated providers can restrict access to affiliated content or block, degrade, or otherwise act contrary to open Internet principles with respect to delivery of unaffiliated online video to their broadband subscribers ); Roku Comments at 8 (noting that such preference for affiliated content poses imminent threats to consumer choice and competition); Vermont Public Service Board and Vermont Public Service Department (Vermont) Reply at 5 (warning that paid prioritization arrangements, for example, can allow broadband providers to to skew the playing field in favor of their own preferred services, products, information, and partners ); OTI Comments at (explaining that mobile carriers have demonstrated that they have the incentives and inclination to block or throttle to favor their own services). 141 See, e.g., Internet Association Comments at See Public Knowledge Comments at 48; see also Consumers Union Reply at 2 (explaining that even if providers do not block content outright, providers can still utilize their market power to harm consumers in more subtle ways, such as by lowering data caps or exempting their own services from such caps ); Roku Comments at 1-2 ( [T]hrottling is only the most transparent of a long list of discriminatory actions that an ISP with market power can undertake. To promote and protect an open Internet, the FCC s rules and policies must guard against a broader list of discriminatory conduct that has the effect of restricting, degrading, or otherwise interfering with consumer access to lawfully available content or services. ). For a more comprehensive discussion, see infra Section III.C See Fiber to the Home Council Americas (FTTH) Comments at See, e.g., Microsoft Comments at 10 ( Preferential transmission arrangements are particularly concerning because broadband access providers can use their [gatekeeper position] to pressure edge providers into entering such arrangements and demand increasingly higher rates and greater concessions from edge providers over time. ); Access Comments at 8 (commenting that with regard to prioritization, broadband providers have incentives that could lead to invest[ing] in infrastructure to disproportionately improve the priority option, cease investment in infrastructure that helps the network as a whole, create artificial scarcity, or even degrade the quality of the current non-priority infrastructure to make prioritized options seem more attractive. ); EFF Comments at 1 (noting that broadband providers have economic incentives to leverage their ownership of the transmission infrastructure at the expense of the open and neutral Internet ); Media Alliance Comments at 2 (agreeing that there are short-term incentives for network providers to block or disadvantage particular providers or classes of providers, charge for prioritized access to end users, or degrade or decline the level of service provided to non-prioritized content ). 32

33 effects of paid prioritization on Internet openness. 145 Further, as discussed above, a broadband provider s incentive to favor affiliated content or the content of unaffiliated firms that pay for it to do so, to block or degrade traffic, to charge edge providers for access to end users, and to disadvantage non-prioritized transmission all increase when end users are less able to respond by switching to rival broadband providers. 83. In addition to the harms outlined above, broadband providers behavior has the potential to cause a variety of other negative externalities that hurt the open nature of the Internet. Broadband providers have incentives to engage in practices that will provide them short term gains but will not adequately take into account the effects on the virtuous cycle. In the Open Internet Order, the Commission found that the unaccounted-for harms to innovation are negative externalities, and are likely to be particularly large because of the rapid pace of Internet innovation, and wide-ranging because of the role of the Internet as a general purpose technology. 146 Further, the Commission noted that a broadband provider may hesitate to impose costs on its own subscribers, but it will typically not take into account the effect that reduced edge provider investment and innovation has on the attractiveness of the Internet to end users that rely on other broadband providers and will therefore ignore a significant fraction of the cost of forgone innovation. 147 The record supports our view that these negative externality problems have not disappeared, and in some cases, may be more prevalent. 148 In order to mitigate these negative results, the Commission needs to act to promote Internet openness. 84. A final point on this question of economic incentives and ability is worth noting. Broadband providers have the ability to act as gatekeepers even in the absence of the sort of market concentration that would enable them to impose substantial price increases on end users. 149 We therefore need not consider whether market concentration gives broadband providers the ability to raise prices. The Commission came to this conclusion in the Open Internet Order, and we conclude the same here. 150 As the Commission noted in the Open Internet Order, threats to Internet-enabled innovation, growth, and competition do not depend on broadband providers having market power with respect to their end users. In Verizon, the court agreed, explaining that broadband providers ability to impose restrictions on edge providers simply depends on end users not being fully responsive to the imposition of such restrictions. 151 As we have concluded in this section, this remains true today See infra Section III.C.1.c Open Internet Order 25 FCC Rcd at , para Id. at 17920, para. 25, n See, e.g., Senator Ron Wyden Comments at 6 ( The risks identified by the Commission in 2010 have not gone away; if anything, the Internet is even more important to social and economic interactions and the market conditions are even more threatening. ); see also ACLU Comments at 7 (discussing the Commission s explanation of negative externalities in the Open Internet Order, and explaining that [i]deally, competitive pressures would encourage demand growth at all points in the broadband market. Unfortunately, given the oligopolistic nature of the local broadband market, many providers can collect the overcharge represented by a paid prioritization or similar agreement while not taking the hit from lowered demand flowing from poorer or more expensive internet service. ); Mozilla Comments at 21 (arguing that [p]aid prioritization has a distinct degrading effect on other access service traffic, an effect that creates complex incentives for network operators. It also represents a visceral deviation from the end-to-end, best efforts history of the Internet, meaning that as a practical matter, it s impossible to understand ex ante the full effects and potential negative externalities that could arise. ). 149 See Verizon, 740 F.3d at 648 (citing 2010 Open Internet Order, 25 FCC Rcd at 17923, para. 32). 150 See 2010 Open Internet Order, 25 FCC Rcd at 17923, para. 32, n Verizon, 740 F.3d at 648. We note further that, of course, our reclassification of broadband Internet access service as a telecommunications service subject to Title II below likewise does not rely on such a test or any measure of market power. Indeed, our reclassification decision is based on whether BIAS meets the statutory definition of a telecommunications service, and not any additional economic circumstances. 33

34 b. Technical Ability 85. As the Commission explained in the Open Internet Order, past instances of abuse indicate that broadband providers have the technical ability to act on incentives to harm the open Internet. 153 Broadband providers have a variety of tools at their disposal that can be used to monitor and regulate the flow of traffic over their networks giving them the ability to discriminate should they choose to do so. Techniques used by broadband providers to identify and select traffic may include approaches based on packet payloads (using deep packet inspection), network or transport layer headers (e.g., port numbers or priority markings), or heuristics (e.g., the size, sequencing, and/or timing of packets). 154 Using these techniques, broadband providers may apply network practices to traffic that has a particular source or destination, that is generated by a particular application or by an application that belongs to a particular class of applications, that uses a particular application- or transport-layer protocol, or that is classified for special treatment by the user, application, or application provider. 155 Applicationspecific network practices depend on the broadband provider s ability to identify the traffic associated with particular uses of the network. Some of these application-specific practices may be reasonable network management, e.g., tailored network security practices. However, some of these techniques may also be abused. 156 Deep packet inspection, for example, may be used in a manner that may harm the open Internet, e.g., to limit access to certain Internet applications, to engage in paid prioritization, and even to block certain content. 157 Similarly, traffic control algorithms can be abused, e.g., to give certain packets favorable placement in queues or to send packets along less congested routes in a manner contrary to end user preferences. 158 Use of these techniques may ultimately affect the quality of service that users receive, which could effectively force edge providers to enter into paid prioritization agreements to prevent poor quality of content to end users. (Continued from previous page) 152 We note, however, that in areas where there are limited competitive alternatives, this may exacerbate other problems such as the ability to switch from one provider to another. See 2015 Broadband Progress Report at para. 83 (indicating that data show that only 12 percent of households have 3 or more options for 25 Mbps/3 Mbps broadband service; 27 percent of households have two provider options for this service; and 45 percent of households have only a single provider option for these services). 153 See supra Section III.B.2.a. 154 See Broadband Internet Technical Advisory Group, Real-Time Network Management of Internet Congestion at 19 (2013), (BITAG Congestion Report) (discussing which traffic is subject to congestion management). 155 Id. at 19 (discussing application-based congestion management). 156 See Jon Peha Comments at 3; NetAccess Futures Comments at (noting that these mechanisms are indispensable for network function or reasonable network management, [but all] of these mechanisms can also be abused, to the detriment of Open Internet principles ). 157 See Internet Association Comments at 14; see also Tumblr Reply at 6-7 (warning that [w]hether broadband providers engage in blocking, discrimination, or access fees through deep packet inspection, or engage in functionally equivalent practices through underinvestment at points of interconnection, consumers and edge providers will still be harmed, and innovation and free expression will still be stifled ). But see NCTA Comments at 15 (claiming that [e]ven if broadband providers had an incentive to degrade their customers online experience in some circumstances, they have no practical ability to act on such an incentive ). 158 See NetAccess Futures Comments at 16; Jon Peha Comments at 3 (filed July 15, 2014) (explaining that [m]ethods to discriminate among traffic classes once traffic has been categorized include separation of traffic into separate real or virtual channels, and use of traffic control algorithms for functions such as packet scheduling, packet dropping, or routing that discriminate ) (emphasis in original); OTI Comments at 18 (arguing that [i]t does not matter either to consumers or to applications providers if the carriers abuse their power through interference that takes advantage of deep packet inspection in routers in their network or through interconnection abuse the resulting harms are the same ). 34

35 3. Mobile Broadband Services 86. We have discussed above the incentives and ability of broadband providers to act in ways that limit Internet openness, regardless of the specific technology platform used by the provider. A significant subject of discussion in the record, however, concerned mobile broadband providers specifically, and we therefore believe it is appropriate to address here the incentive and ability that these providers have to limit Internet openness. As the Commission noted in the Open Internet Order, [c]onsumer choice, freedom of expression, end-user control, competition, and the freedom to innovate without permission are as important when end users are accessing the Internet via mobile broadband as via fixed. 159 The Commission noted that there have been instances of mobile providers blocking certain third-party applications, particularly applications that compete with the provider s own offerings However, the Commission also noted the nascency of the mobile broadband industry, 161 citing the recent development of app stores, 162 and what it characterized at the time as new business models for mobile broadband providers, including usage-based pricing. 163 Furthermore, the Commission at that time found that [m]obile broadband speeds, capacity, and penetration [were] typically much lower than for fixed broadband and noted that carriers had only begun to offer 4G service Citing these factors, as well as greater consumer choice, meaningful recent moves toward openness in and on mobile broadband networks, and the operational constraints faced by mobile broadband providers, 165 the Commission applied its open Internet rules to mobile broadband, but distinguished between fixed and mobile broadband in some regards: while it applied the same transparency rule to both fixed and mobile network providers, it adopted a different no-blocking standard for mobile broadband Internet access service, and excluded mobile broadband from the unreasonable discrimination rule. In the 2014 Open Internet NPRM, the Commission tentatively concluded that it should maintain the same approach going forward, but recognized that there have been significant changes since 2010 in the mobile marketplace. 166 The Commission sought comment on whether those changes should lead it to revisit the treatment of mobile broadband services Today, we find that changes in the mobile broadband marketplace warrant a revised approach. We find that the mobile broadband marketplace has evolved, and continues to evolve, but is no longer in a nascent stage. As discussed below, mobile broadband networks are faster, more broadly deployed, more widely used, and more technologically advanced than they were in We conclude that it would benefit the millions of consumers who access the Internet on mobile devices to apply the same set of Internet openness protections to both fixed and mobile networks Open Internet Order, 25 FCC Rcd 17956, para Id. 161 Id. at , para Id. 163 Id. 164 Id. at 17957, para Id Open Internet NPRM, 29 FCC Rcd at 5583, para Id. 168 Although we adopt the same rules for both fixed and mobile services, we recognize that with respect to the reasonable network management exception, the rule may apply differently to fixed and mobile broadband providers. See infra Section III.D.4. 35

36 89. Network connection speed and data consumption have exploded. For 2010, Cisco reported an average mobile network connection speed of 709 kbps. 169 Since that time there has been massive expansion of mobile broadband networks, providing vastly increased download speeds. For 2013, Cisco reported an average mobile connection speed of 2,058 kbps. 170 This increase in speed is partially due to the deployment of faster network technologies. Currently, mobile broadband networks provide coverage and services using a variety of 3G and 4G technologies, including, most importantly, LTE. 171 As a consequence of the growing deployment of next generation networks, there has been an increase of more than 200,000 percent in the number of LTE subscribers, from approximately 70,000 in to over 140 million in Concurrent with these substantial changes in mobile broadband deployment and download speeds, mobile data traffic has exploded, increasing from 388 billion MB in 2010 to 3.23 trillion MB in AT&T reports that its wireless data traffic has grown 100,000 percent between 2007 and 2014 and 20,000 percent over the past five years. 175 T-Mobile states that data usage continues to expand exponentially, with year-to-year increases of roughly 120 percent As consumers use smartphones and tablets more, they increasingly rely on mobile broadband as a pathway to the Internet. The Internet Association argues that mobile Internet access is essential, since many Americans are wholly reliant on mobile wireless for Internet access. 177 In addition, evidence shows that consumers in certain demographic groups, including low income and rural consumers and communities of color, are more likely to rely on mobile as their only access to the Internet. 178 Citing data from the Pew Research Center s Internet & American Life Project, OTI states that [t]he share of Americans relying exclusively on their smartphone[s] to access the Internet is far higher 169 Cisco, Cisco Visual Networking Index: Global Mobile Data Traffic Forecast Update at 13 (2011). 170 Cisco, Cisco Visual Networking Index: Forecast Highlights (2014), These connection speeds are inclusive of all types of devices, while speeds for smartphones may be higher. Cisco reported an average connection speed of 9,942 kbps for smartphones in Id. 171 Long-Term Evolution (LTE) is a high-speed packet switched mobile broadband network technology. Starting in 2014, some operators introduced LTE-Advanced, mainly by using carrier aggregation and more capable devices. 172 Telegeography, US Remains at Forefront of LTE Service Adoption (Mar. 15, 2012), (last visited Feb. 10, 2015). 173 CTIA Blog, Mobile Broadband: A Story of Dynamism and Transformation (Jan. 9, 2015), (last visited Feb. 10, 2015). 174 Section 6002(B) of the Omnibus Budget Reconciliation Act of 1993; Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, WT Docket No , Seventeenth Report, 29 FCC Rcd (Wireless Tel. Bur. 2014) (17th Mobile Wireless Report); Robert F. Roche & Liz Dale, Annual Wireless Survey Results: A Comprehensive Report from CTIA Analyzing the U.S. Wireless Industry (June 2014). 175 Section 6002(B) of the Omnibus Budget Reconciliation Act of 1993;Annual Report and Analysis of Competitive Market Conditions With Respect to Mobile Wireless, Including Commercial Mobile Services, WT Docket No , Sixteenth Report, 28 FCC Rcd 3700, , para. 334 (Wireless Tel. Bur. 2013) (16th Mobile Wireless Report). See AT&T, AT&T Adds High-Quality Spectrum to Support Customers Growing Demand for Mobile Video and High-Speed Internet (Jan. 30, 2015), _support_growing_demand_for_mobile_video_and_high_speed_internet.html. 176 T-Mobile Reply at Letter from Abigail Slater, Vice President Legal and Regulatory Policy, Internet Association to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 1 (filed Oct. 13, 2014). 178 OTI Comments at

37 among Hispanics, Blacks, and adults aged 18-29, and households earning less than $30,000 a year. 179 According to data from the National Health Interview Survey, 44 percent of households were wirelessonly during January-June 2014, compared to 31.6 percent during January-June These data also show that 59.1 percent of adults living in poverty reside in wireless-only households, relative to 40.8 percent of higher income adults. 181 Additionally, rural consumers and businesses often have access to fewer options for Internet service, meaning that these customers may have limited alternatives when faced with restrictions to Internet openness imposed by their mobile provider. 182 Furthermore, just as consumer reliance on mobile broadband has grown, edge providers increasingly rely on mobile broadband to reach their customers. Microsoft states, for example, that, with the pressure... only increasing to either go mobile or go home, edge providers frequently introduce new edge services on mobile platforms first, and the success or failure of these edge providers businesses often depends in large part on their mobile offerings Furthermore, the technology underlying today s mobile broadband networks, as compared to those deployed in 2010, not only provides operators with a greater ability to manage their networks consistent with the rules we adopt today, 184 but also gives those operators a greater ability to engage in conduct harmful to the virtuous cycle in the absence of open Internet rules. 185 As discussed above, certain behaviors by broadband providers may impose negative externalities on the Internet ecosystem, resulting in less innovation from edge providers. 186 We find that the same is true today for mobile wireless broadband providers, particularly as mobile broadband technology has become more widespread and mobile broadband services have become more integrated into the economy. 179 Id. at Stephen J. Blumberg & Julian V. Luke, Wireless Substitution: Early Release of Estimates from the National Health Interview Survey, January-June 2014 at 5, U.S. Department of Health and Human Services, Centers for Disease Control and Prevention (Dec. 2014), Id. at 2. Living in poverty is defined as being below the U.S. Census Bureau s household income poverty thresholds. Higher income is defined as having an income of 200 percent of the poverty threshold or greater. Id. at See 17th Mobile Wireless Report, 29 FCC Rcd at 15338, para. 55 (presenting data that, as of January 2014, 92.0 percent of non-rural U.S. POPs lived in a census block covered by 4 or more mobile broadband providers, while the figure was 39.6 percent for rural U.S. POPs). One should note however, that the number of providers in a census block represent network coverage, which does not necessarily reflect the number of choices available to a particular individual or household. Coverage calculations based on Mosaik data, while useful for measuring developments in mobile wireless coverage, have certain limitations that likely overstate the extent of mobile wireless coverage. See id. at 15333, para. 45 n Microsoft Comments at See, e.g., OTI Comments at (arguing that [t]here is nothing about the technology of today s increasingly prevalent 4G wireless data networks that should preclude compliance with open Internet protections, including the extension of basic Carterfone protections to mobile broadband Internet access networks. Although mobile 4G/LTE technologies have advanced considerably since 2010, they have evolved in a manner that make open platforms and a non-discrimination rule far more feasible to implement than the Commission anticipated four years ago. ). 185 See, e.g., OTI Reply at 23-24; Cisco, Integrated DPI and Cisco In-Line Services: Optimize the Flow of Traffic and Monetize Your Network, (last visited Feb. 10, 2015) ( Industry experts agree that DPI and its complementary applications are the best way to increase network efficiency and a mobile operator's revenue. ); see also Sandvine, Deep Packet Inspection (DPI), (last visited Feb. 10, 2015). 186 See supra paras

38 92. In view of the evidence showing the evolution of the mobile broadband marketplace, we conclude that it would best serve the public interest to revise our approach for mobile broadband services and apply the same openness requirements as those applied to providers of fixed broadband services. The Commission has long recognized that the Internet should remain open for consumers and innovators alike, regardless of the different technologies and services through which it may be accessed. 187 Although the Commission found in 2010 that conditions at that time warranted a more limited application of open Internet rules to mobile broadband services, it nevertheless recognized the importance of freedom and openness for users of mobile broadband networks, finding that consumer choice, freedom of expression, end-user control, competition, and the freedom to innovate without permission are as important when end users are accessing the Internet via mobile broadband as via fixed. 188 In contrast to the state of the mobile broadband marketplace when the Commission adopted the 2010 open Internet rules, the evidence in the record today shows how mobile broadband services have evolved to become essential, critical means of access to the Internet for millions of consumers every day. Because of this evolution and the widespread use of mobile broadband services, maintaining a regime under which fewer protections apply in a mobile environment risks creating a substantively different Internet experience for mobile broadband users as compared to fixed broadband users. Broadband users should be able to expect that they will be entitled to the same Internet openness protections no matter what technology they use to access the Internet. We agree with arguments made by a large number of commenters that applying a consistent set of requirements will help ensure that all consumers can benefit from full access to an open and robust Internet. 189 We note that evidence in the record indicates that mobile broadband providers themselves have recognized the importance of open Internet practices for mobile broadband consumers Despite their support of open Internet principles, several of the nationwide mobile providers oppose broader openness requirements for mobile broadband, arguing that additional rules are unnecessary in the mobile broadband market. T-Mobile, for example, argues that robust retail competition in the mobile broadband market already constrains mobile provider behavior. 191 Verizon comments that consumer choice and competition also have ensured a differentiated marketplace in which providers routinely develop innovative offerings designed to outcompete competitors offerings. 192 AT&T contends that additional rules are unnecessary as mobile broadband providers are already investing in the networks, innovating, reducing prices, and thriving. 193 CTIA contends that the robust competitive conditions in the mobile broadband marketplace are a defining differentiator and that any new open Internet framework should account for the competitive mobile dynamic Open Internet Order, 25 FCC Rcd at 17956, para Id. 189 See, e.g., CDT Comments at 28; Consumers Union Comments at 11-14; Cox Comments at 8-11; Frontier Comments at 8-10; Internet Association Reply at 5-7; Microsoft Comments at 19-27; Mozilla Reply at 20-21; NCTA Comments at 69-70; OTI Comments at 27-28; Public Knowledge Comments at 23-24; Time Warner Cable (TWC) Comments at 27-28; Vonage Comments at CTIA Comments at T-Mobile Reply at Verizon Reply at 27; see also Verizon Jan. 15, 2015 Ex Parte Letter Attach. at AT&T Reply at Letter from Scott K. Bergmann, Vice Pres. Reg. Affairs, CTIA to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 1 (filed Nov. 6, 2014); see also Letter from Scott K. Bergmann, Vice Pres. Reg. Affairs, CTIA to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 2 (CTIA Feb. 10, 2015 Ex Parte Letter) ( Today, the mobile broadband market is even more competitive than it was in 2010: Data from the Commission s justreleased Seventeenth Report shows that 82% of Americans can choose among four or more mobile broadband providers. ). However, we note that this data cited from the 17th Mobile Wireless Report represent network coverage, which does not necessarily reflect the number of choices available for purchase by a particular individual (continued.) 38

39 94. Based upon the significant changes in mobile broadband since 2010 discussed above, including the increased use of mobile broadband and the greater ability of mobile broadband providers to engage in conduct harmful to the virtuous cycle, we are not persuaded that maintaining fewer open Internet protections for consumers of mobile broadband services would serve the public interest. Contrary to provider arguments that applying a broader set of openness requirements will stifle innovation and chill investment, we find that the rules we adopt today for all providers of services will promote innovation, investment, and competition. As we discuss above, an open Internet enables a virtuous cycle where new uses of the network drive consumer demand, which drives network improvements, which result in further innovative uses. We agree with commenters that mobile is a key component of the virtuous cycle. 195 OTI comments that a variety of economic analyses suggest that the Internet s openness is a key driver of its value.... Other economic studies have found that non-neutral conditions in the broadband market might maximize profits for broadband providers but would ultimately minimize consumer welfare.... There is significant evidence that a vibrant and neutral online economy is critical for a healthy technology industry, which is a significant creator of jobs in the U.S. 196 We find that these arguments apply to mobile broadband providers as well as to fixed, and apply even though there may be more competition among mobile broadband providers. 95. We note that the Commission s experience with applying open platform rules to Upper 700 MHz C Block licensees, 197 including Verizon Wireless, has shown that openness principles can be applied to mobile services without inhibiting a mobile provider s ability to compete and be successful in the marketplace. We find that it is reasonable to conclude that, even with broader application of Internet openness requirements, mobile broadband providers will similarly continue to compete and develop innovative products and services. We also expect that the force of consumer demand that led mobile broadband providers to invest in their networks over the past four years will likely continue to drive substantial investments in mobile broadband networks under the open Internet regime we adopt today Although mobile providers generally argue that additional rules are not necessary to deter practices that would limit Internet openness, concerns related to the openness practices of mobile broadband providers have arisen. As we noted in the 2014 Open Internet NPRM, in 2012, the Commission reached a $1.25 million settlement with Verizon for restricting tethering apps on Verizon smartphones, based on openness requirements attached to Verizon s Upper 700 MHz C Block licenses. 199 Also in 2012, consumers complained when they encountered problems accessing Apple s FaceTime application on AT&T s network. 200 More recently, significant concern has arisen when mobile providers (Continued from previous page) household. Coverage calculations are based on Mosaik data, which have certain limitations that likely overstate the extent of mobile wireless coverage. Furthermore, as discussed above, the ability of broadband providers to threaten the open Internet does not depend on them having market power over their end users. See also infra para. 98 (citing some recent examples of consolidation in the wireless industry); Policies Regarding Mobile Spectrum Holdings, WT Docket No , Report and Order, 29 FCC Rcd. 6133, , para. 46 (2014) (describing past consolidation of the wireless industry, including in terms of factors beyond only the number of competitors, such as market shares and spectrum holdings). 195 Mozilla Reply at OTI Comments at MHz Second Report and Order, 22 FCC Rcd at 15359, para. 60; 47 C.F.R See Microsoft Comments at See generally Cellco Partnership d/b/a Verizon Wireless, File No. EB-11-IH-1351, Acct. No , FRN , Order and Consent Decree, 27 FCC Rcd 8932 (2012). 200 AT&T initially restricted use of Apple s FaceTime and ipad application to times when the end user was connected to Wi-Fi and thus to another broadband provider. The Commission did not conclude whether such a practice violated open Internet principles. See David Kravets, AT&T Holding FaceTime Hostage is No Net- Neutrality Breach, Wired.com (Aug. 22, 2012) (continued.) 39

40 have attempted to justify certain practices as reasonable network management practices, such as applying speed reductions to customers using unlimited data plans in ways that effectively force them to switch to price plans with less generous data allowances. 201 As Consumers Union observes, many mobile broadband provider practices are non-transparent, because customers receive no warning or explanation of when their speeds will be slowed down. 202 Other commenters such as OTI also cite mobile providers blocking of the Google Wallet e-payment application. 203 Although providers claimed that the blocking was justified based on security concerns, OTI notes that this carrier behavior raised anticompetitive concerns when AT&T, Verizon and T-Mobile later unveiled their own mobile payment application, a competitor to Google Wallet Microsoft also describes further potential for abuse based on its experience in other countries without open Internet protections, claiming, for example, that several broadband access providers around the world have interfered or degraded Skype traffic on their networks. 205 A recent survey of European Internet users found that respondents reported experiencing problems with blocking of internet content. 206 Mobile services notably accounted for a significant percentage of negative experiences reported in the survey. 207 OTI argues that, even with competition, mobile providers have an interest in seeking rents from edge providers and in securing a competitive advantage for their own competing apps, content and services. 208 We agree, and find that the rules we adopt today for mobile network providers will help guard against future incidents that have the potential to affect Internet openness and undermine a mobile broadband consumer s right to access a free and open Internet. 97. In addition, we agree with those commenters that argue that mobile broadband providers have the incentives and ability to engage in practices that would threaten the open nature of the Internet, in part due to consumer switching costs. Switching costs are a significant factor in enabling the ability of mobile broadband providers to act as gatekeepers. Microsoft states that for the large number of applications that are available only in the mobile context, mobile broadband access providers today can be an edge provider s only option for reaching a particular end user, and argues that, because of high switching costs, few mobile broadband consumers routinely switch providers. 209 Therefore, Microsoft argues, even if there is more than one mobile broadband access provider in a specific market, there may not be effective competitive alternatives (for edge providers or consumers) and these mobile broadband access providers retain the ability to act in a manner that undermines the competitive neutrality of the online marketplace. 210 (Continued from previous page) neutrality0flap/ (last visited Feb. 10, 2015); see also Open Internet Advisory Committee, 2013 Annual Report (Aug. 20, 2013), at 39-46, (2013 OIAC Annual Report). 201 See Prepared Remarks of FCC Chairman Tom Wheeler, 2014 CTIA Show, Las Vegas, NV (Sept. 9, 2014). 202 Consumers Union Reply at WGAW Comments at 15. But see CTIA Reply at OTI Comments at Microsoft Comments at European Commission, 1 in 4 European Internet Users Still Experience Blocking of Internet Content, Study Shows (Feb. 27, 2014), Id. 208 OTI Reply at 25; see also Letter from Michael Calabrese, Director, Wireless Future Project, New America Open Technology Institute and Delara Derakhshani, Policy Counsel, Consumers Union, to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 5 (filed January 28, 2015) (OTI/Consumers Union Ex Parte Letter). 209 Microsoft Comments at Id. 40

41 98. The level of wireless churn, when viewed in conjunction with data on consumer satisfaction, is consistent with the existence of important switching costs for customers. Based on results from surveys, OTI and Consumers Union argue that switching costs have depressed mobile wireless churn rates, 211 meaning that customers may remain with their service providers even when they are dissatisfied. 212 Consumers Union cites a February 2015 Consumer Reports survey showing that 27 percent of mobile broadband consumer[s] who are dissatisfied with their mobile broadband service provider are reluctant to switch carriers due to several factors. 213 That many customers stay with their mobile wireless providers, despite expressing dissatisfaction with their current provider and despite the availability of alternate plans from other providers, suggests the presence of significant barriers to switching. 214 Furthermore, this has been a period of market and spectrum consolidation, which has decreased the choices available to consumers in many parts of the country. For example, Vonage argues that recent mergers between AT&T and Leap, and T-Mobile and MetroPCS have reduced the ability of wireless end users to switch to competing providers in the event of potential discrimination against the edge services they may want to access. 215 Choices may be particularly limited in rural areas, both 211 See OTI/Consumers Union Ex Parte Letter at 3-4 ( Despite recent increased price competition from T-Mobile and Sprint, the two dominant carriers (AT&T and Verizon) continue to enjoy industry-low customer churn rates. In 2014 AT&T realized both its lowest churn rate for a quarter (0.86 percent among postpaid subscribers) and for a full year (1.035 percent). ). Average monthly churn across AT&T, Sprint, T-Mobile, and Verizon Wireless was 1.56 percent in the first three quarters of 2014, compared to 1.83 percent in all of See 16th Mobile Wireless Report, 28 FCC Rcd at 3865, Chart 18; 17th Mobile Wireless Report, 29 FCC Rcd at 15325, Chart II.B See OTI/Consumers Union Ex Parte Letter at 4 ( The American Customer Satisfaction Index found that wireless service remains among the lower-scoring categories of industries they review. Among the 43 major U.S. industries rated, the consumer satisfaction ranking of mobile carriers are tied for 38th worst with the U.S. Postal Service and just one spot above the satisfaction score of airlines (wireline ISPs are dead last). The OTI representative stated that it would be completely implausible to attribute historically low churn rates to consumer satisfaction when, in fact, consumer satisfaction is among the lowest five industries among America s 43 largest consumer-facing industries. ); see also Consumers Union Comments at 14 ( A January 2014 Consumer Reports article reported that high switching costs continue to serve as barriers to customers freely changing carriers. Thirtyone percent of survey respondents said that they are seriously considering switching providers, but one in six of that group said that they cannot switch because long-term contracts and early termination fees handcuff them to carriers. ). But see CTIA Feb. 10, 2015 Ex Parte Letter at 3-4 (disagreeing with New America and Consumers Union by arguing that surveys show high levels of customer satisfaction); Verizon Jan. 15, 2015 Ex Parte Letter Attach. at (arguing that recent levels of churn show that many consumers can switch). Although a number of consumers may well be satisfied with their mobile broadband service, the surveys cited by OTI and Consumers Union also suggest that there are significant numbers of dissatisfied customers who feel they cannot switch. These consumers are likely to have difficulty responding to broadband provider polices that disrupt the open Internet. 213 OTI/Consumers Union Ex Parte Letter at Paul de Sa, Ian Chun, and Julia Zhen present an analysis of the price plans available from AT&T, Sprint, T- Mobile, and Verizon Wireless during the summer of 2014, concluding that it almost always makes economic sense for perfectly rational subscribers to change carriers, as there are generally cheaper plans available from rival carriers to attract switchers. The authors argue that the low observed switching rates, despite the availability of these plans, suggest[] that many other factors aside from price are relevant drivers of churn, consistent with [the authors ] view of substantial demand inertia. Paul de Sa, Ian Chun, and Julia Zheng, Bernstein Research, A Different Way to Compare Mobile Pricing (Or Does Discounting Matter?) at 5 (August 21, 2014) (Aug de Sa Pricing Report) (emphasis in original). 215 Vonage Comments at 17-18; see also Policies Regarding Mobile Spectrum Holdings, WT Docket No , Report and Order, 29 FCC Rcd 6133, , paras (2014); OTI/Consumers Union Ex Parte Letter at

42 because fewer service providers tend to operate in these regions and because consumers may encounter difficulties in porting their numbers from national to local service providers Switching costs may arise due to a number of factors that affect mobile consumers. For example, consumers may face costs due to informational uncertainty, particularly in the context of concerns over open Internet restrictions. The provision of wireless service involves the interaction between the wireless network operator, the various edge providers, the customer s handset or other equipment, and the conditions present in the specific location the customer wishes to use the service. In this environment, it can be very difficult for customers to ascertain the source of a service disruption, and hence whether switching wireless providers would solve the problem. 217 Additionally, product differentiation can make it difficult for consumers to compare plans, which may also increase switching costs. 218 Finally, customers may face a variety of hassle-related and financial switching costs. 219 Disconnecting an existing service and activating a new one may involve early termination fees (ETFs), coordinating with multiple members of a family plan, billing set-up, transferring personal files, and porting phone numbers, each of which may create delays or difficulties for customers. 220 As part of this process, some customers may need to replace their equipment, which may not be compatible with their 216 See supra note 182; OTI/Consumers Union Ex Parte Letter at 2 ( Phone number portability is administered so that it works well only for national carriers, since consumers often don t have the option to keep their number when moving from a national to non-national carrier. ). 217 See Public Knowledge Comments at 18 ( Switching providers incurs uncertainty costs because it is very difficult for consumers to assess the quality of a new service in advance. However, allowing paid prioritization and other blocking systems can create additional sources of uncertainty that magnify access networks market power. In particular, customers may not be able to ascertain the sources of internet access problems, and therefore may attribute quality of service issues to edge providers instead of network operators. Regardless of what party might be responsible for the situation, [t]he fact that the quality of the network services is opaque to consumers under discrimination, confers additional market power to access networks. ). 218 New America OTI/Consumers Union Ex Parte Letter at 4. Wireless service providers are differentiated in terms of their network performance, coverage, device lineups, and plan features, among other things. See 17 th Mobile Wireless Report, para 168. See also CTIA Feb. 10, 2015 Ex Parte Letter Attach. at 19 ( In 2013 alone, the four major carriers offered nearly 700 combinations of smartphone plans, and a family of five had in excess of 250 choices to select from. ). 219 OTI/Consumers Union Ex Parte Letter at 2 ( Of course, subscribers can switch carriers, but relatively few do primarily because of the multiple strategies that carriers use to create both the perception and the reality of substantial financial penalties, loss of time and uncertainties about retaining your data or even, in some cases, your phone number. ) (emphasis in original). 220 See, e.g., Microsoft Comments at 24 (In the U.S., [p]art of the reason churn is so low is because customers sign two-year contracts with high early termination fees. Another is that many customers are on family or enterprise plans, which are often more sticky and make it more difficult for customers to switch carriers. ). But see AT&T Reply at (noting that many innovative service plans provide the option of eliminating early termination fees and that this recent shift in the industry away from ETFs has significantly reduced the cost of switching providers and enabled customers to act immediately when a competitor introduces a more attractive service offering ). However, although there have been recent promotions by some providers regarding ETFs and some developments in secondary markets for contracts and devices, ETFs continue to affect a large proportion of customers who do not elect to purchase their phones up front, and switching costs remain due to the other factors discussed above. A majority of nationwide mobile broadband providers charge ETFs, which currently range from approximately $350 to $650, based on the type of plan and the number of members in the plan. Typically, the ETFs are pro-rated based on an average 2-year contract plus the cost of an associated handset (which can amount to as much as $650 for a high end phone such as an iphone 6). Furthermore, it is not clear that ETF promotions will continue to always be available. See 17th Mobile Wireless Report, 29 FCC Rcd at 15382, para. 145; OTI/Consumers Union Ex Parte Letter at 2 (arguing that T-Mobile s ETF offer is a temporary marketing strategy ); see infra note

43 new mobile service provider s network. 221 OTI and Consumers Union argue that moving multiple members of a shared or family plan may be particularly expensive, since [n]ot only do groups face the cost of multiple ETFs, but frequently the contract termination dates become nonsynchronous due to the addition of new lines and individuals upgrading their devices at different points in time. 222 Furthermore, OTI and Consumers Union argue that these costs affect an increasingly large proportion of consumers, since the penetration of shared plans has increased such that the majority of AT&T and Verizon Wireless customers now have shared plans AT&T, T-Mobile, and Verizon argue that the factors that led the Commission to adopt a more limited set of openness rules for mobile in 2010 remain valid today. They argue that mobile broadband networks should not be viewed as mature as mobile technologies continue to develop and evolve. 224 They also contend that the extraordinary growth in use of mobile broadband services requires that providers have more flexibility to be able to handle the increased traffic and ensure quality of service for subscribers. T-Mobile, for example, asserts that while mobile networks are more robust and offer greater speeds and capacity than they did when the 2010 rules were enacted, they also face greater demands; their need for agile and dynamic network management tools has actually increased We recognize that mobile service providers must take into account factors such as mobility and reliance on spectrum. As discussed more fully below in the context of each of the rules, however, we find that the requirements we adopt today are sufficiently tailored to provide carriers with the flexibility they need to accommodate these conditions. Moreover, as described further below, we conclude that retaining an exception to the no-blocking rule, the no-throttling rule, and the nounreasonable interference/disadvantage standard we adopt today for reasonable network management will allow sufficient flexibility for mobile service providers. 4. The Commission Must Act to Preserve Internet Openness 102. Given that broadband providers both fixed and mobile have both the incentives and ability to harm the open Internet, we again conclude that the relatively small incremental burdens imposed by our rules are outweighed by the benefits of preserving the open nature of the Internet, including the 221 See, e.g., Free Press Comments at 31-32, n.47 (arguing that differences in network technologies and frequency bands can lead to handset incompatibilities, meaning customers must purchase new equipment); Aug de Sa Pricing Report at 2 ( In general, other carriers phones (at least for iphones) cannot easily be ported to Verizon or Sprint, and Sprint phones cannot be brought to other carriers. ). Should customers require that their devices be unlocked, they may be subject to ETFs, per CTIA s Consumer Code. CTIA, Consumer Code for Wireless Service, (last visited Feb. 12, 2015). 222 OTI/Consumers Union Ex Parte Letter at 3. But see CTIA Feb.10, 2015 Ex Parte Letter at 3 (disagreeing with New America and Consumers Union s assertions about high switching costs and the effects of family plans, citing to ETF buyout offers). We discuss some caveats to ETF buyout promotions above. Furthermore, because ETF rebates can take months to process, they may not be adequate switching incentives for credit- and liquidity-constrained customers. This may be particularly true when dealing with multiple ETFs at once, as in a family or shared plan. T- Mobile, ETF Reimbursement FAQs, (last visited Feb. 12, 2015); Sprint, It s a T- Mobile Triple Threat, (last visited Feb. 12, 2015); Verizon, Switch and Save. (last visited Feb. 12, 2015). See also Simon Flannery and Jon Mark Warren, AT&T and Verizon, US Wireless: The Trouble with Churn at 3 (Aug. 7, 2013) ( Family/Shared plans promote lower churn because of the lower per-line cost, the networking effect (friends and family on the same network), and the difficulty of coordinating a carrier change. ). 223 Id at 3. OTI and Consumers Union report that nearly 70 percent of AT&T s and 61 percent of Verizon Wireless s postpaid subscribers had shared plans as of the fourth quarter of 2014, compared to 33 percent and 46 percent, respectively, in the fourth quarter of Id. 224 Verizon Reply at 28; CTIA Comments at 7, 25; Mobile Future Comments at 11-12; AT&T Reply at T-Mobile Reply at 2. 43

44 continued growth of the virtuous cycle of innovation, consumer demand, and investment. 226 We note, for example, that the disclosure requirements adopted in this order are widely understood, have industrybased definitions, and are commonly used in commercial Service Level Agreements by many broadband providers. 227 Open Internet rules benefit investors, innovators, and end users by providing more certainty to each regarding broadband providers behavior, and helping to ensure the market is conducive to optimal use of the Internet. Open Internet rules are also critical for ensuring that people living and working in rural areas can take advantage of the substantial benefits that the open Internet has to offer. 228 In minority communities where many individuals only Internet connection may be through a mobile device, robust open Internet rules help make sure these communities are not negatively impacted by harmful broadband provider conduct. 229 Such rules additionally provide essential safeguards to ensure that the Internet flourishes as a platform for education and research Open Internet Order, 25 FCC Rcd at 17928, para. 39 (noting that there are some costs to implementing open Internet rules, such as additional disclosures about broadband provider practices, but these costs are not overly burdensome, and they are outweighed by the substantial benefits provided by the rules). Below, we further discuss the costs associated with enhanced transparency. See infra Section III.C.3.b(i). See also, e.g., AOL Comments at 2 (explaining that [t]he Internet s openness has fostered innovation and investment both in advancements in network deployment and the services that ride upon them creating... a virtuous circle, where richer and more diverse content on the edge jump-starts demand, which brings about infrastructure investment, which brings about even richer and more diverse content ); Open MIC Comments at 3 (noting that [o]pen Internet principles also promote free speech, civic participation, democratic engagement and marketplace competition, as well as robust broadband adoption and participation in the Internet community by minorities and other socially and economically disadvantaged groups ). 227 See infra Section III.C.3.b.i.; see also infra para. 112 (supporting the idea that the burdens should not be overwhelming because many broadband providers still voluntarily continue to abide by the 2010 no-blocking rule, even though they are no longer legally required to do so). 228 See, e.g., Center for Rural Strategies Reply at 1 (arguing that entrepreneurs, artists, educators, activists, healthcare providers, and devoted community members... deserve a fair playing field. The Open Internet has given us the opportunity to revitalize Rural America s local economies, share our culture with global audiences, and amplify rural voices in debates shaping our society. But we are at risk of losing this valuable tool, even when 14.5 million of us cannot yet access it. ); Letter from Edyael Casaperalta, Rural Broadband Policy Group Coordinator, National Rural Assembly to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , , at 1 (filed Oct. 20, 2014) (explaining that [i]t is the neutrality of the Open Internet that has given rural people an opportunity to launch businesses from our hometowns, revitalize our regional economies, share rural culture with global audiences, and amplify rural voices in debates shaping our society. Simply put, rural communities depend on Network Neutrality to get a fair shake online ). 229 See, e.g., Public Knowledge Comments at 27 ( Many traditionally disadvantaged communities rely on wireless as their only internet connection and thus have the most to lose from discrimination over wireless. ); see also, e.g., Independent Filmmaker Organizations Reply at 11 (explaining that they are especially concerned that limiting the extent to which Open Internet rules apply to mobile broadband providers allows providers to maintain too much control over the quality and kind of content consumers can access. This presents the real danger of creating a second class of Internet access service for those who can only access the Internet through mobile broadband. These individuals are often underrepresented individuals in low income or minority groups who are already on the wrong side of the digital divide and are most in need of the Commission s attention and support. ); National Minority Organizations (MMTC) Comments at 6 (noting that nearly 75 percent of African American and 68 percent of Hispanic cell phone owners use their devices to access the Internet, and these numbers are increasing ). 230 See, e.g., Letter from Emily Sheketoff, Executive Director, Washington Office, American Library Association (ALA), to Marlene H. Dortch, Secretary, FCC, WC Docket No , at 1-2 (filed Nov. 6, 2014) ( The Internet has become a vitally important platform for libraries and higher education in a wide variety of ways, such as for multimedia instruction and distance learning, educational collaboration through document-sharing websites and applications, storage and retrieval of digital archives, tele-health information, public access to Internet information, and many other educational services. Ensuring the Internet remain an open platform is absolutely essential for libraries to serve their communities. ); see also, e.g., AAJC Comments at 2-3 ( A free and open Internet ecosystem (continued.) 44

45 103. The Commission s historical open Internet policies and rules have blunted the incentives, discussed above, to engage in behavior harmful to the open Internet. 231 Commenters who argue that rules are not necessary overlook the role that the Commission s rules and policies have played in fostering that result. 232 Without rules in place to protect the open Internet, the overwhelming incentives broadband providers have to act in ways that are harmful to investment and innovation threaten both broadband networks and edge content. 233 Paid prioritization agreements, for example, have the potential to distort the market by causing prices not to reflect efficient cost recovery and by altering consumer choices for content and edge providers. 234 The record reflects the view that paid arrangements for priority treatment, such as broadband providers discriminating among content providers or prioritizing one provider s or its own content over others, likely damage the open Internet, harming competition and consumer choice. 235 Additionally, blocking and throttling harm a consumer s right to access lawful content, applications, and services, and to use non-harmful devices. 236 C. Strong Rules That Protect Consumers from Practices That Can Threaten the Open Internet 104. We are keenly aware that in the wake of the Verizon decision, there are no rules in place to prevent broadband providers from engaging in conduct harmful to Internet openness, such as blocking a consumer from accessing a requested website or degrading the performance of an innovative Internet application. 237 While many providers have indicated that, at this time, they do not intend to depart from (Continued from previous page) is critically important to the Asian American community for a number reasons including... creat[ing] opportunities for online education, especially for English language learners. ); American Association of State Colleges and Universities et al. Comments 2 ( Our nation s libraries and institutions of higher education are leaders in creating, fostering, using, extending and maximizing the potential of the Internet for research, education and the public good. Libraries and institutions of higher education depend upon an open Internet to fulfill their missions and serve their communities. ). 231 See, e.g., CWA & NAACP Comments at 4 (noting that CWA and NAACP agree with the Commission s assertion that one of the primary reasons there have been limited violations of Internet openness is because the Commission has had policies in place to address misconduct). 232 See supra Section III.A.; see also, e.g., Layton Comments at See, e.g., Greenlining Institute et al. Comments at 3 ( By rejecting the Commission s anti-blocking and antidiscrimination rules, the Verizon court has opened up the possibility that without the Commission s intervention, carriers will determine the winners and losers of the digital world. ); see also Verizon, 740 F.3d at 645 (finding that the Commission adequately supported and explained that absent open Internet rules, broadband providers represent a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment ). 234 See, e.g., Ad Hoc Comments at (discussing potential market distortions caused by paid prioritization agreements). 235 See, e.g., Access Comments at 8 (commenting that broadband providers have incentives that could lead to invest[ing] in infrastructure to disproportionately improve the priority option, cease investment in infrastructure that helps the network as a whole, create artificial scarcity, or even degrade the quality of the current non-priority infrastructure to make prioritized options seem more attractive ); MDTC Comments at 3-4; see also AARP Comments at 17 (stating that individualized bargaining will institutionalize pay-for priority schemes and undermine innovation and investment ); Illinois and New York Comments at (arguing that individualized prioritization agreements could complicate meaningful disclosures by making them overly difficult for consumers to understand). 236 See infra Sections III.C.1.a-b. 237 See supra Section IV.B. We acknowledge other laws address behavior similar to that which our rules are designed to prevent; however, as discussed below, we do not find existing laws sufficient to adequately protect consumers access to the open Internet. For example, some parties have suggested that existing antitrust laws would address discriminatory conduct of an anticompetitive nature. See ICLE Comments at 39; Citizens Against Government Waste Comments at 2; Hurwitz Comments at 7-8; see also infra Section III.G. We also note that (continued.) 45

46 the previous rules, an open Internet is too important to consumers and innovators to leave unprotected. Therefore, we today reinstate strong, enforceable open Internet rules. 238 As in 2010, we believe that conduct-based rules targeting specific practices are necessary No-Blocking. First, we adopt a bright-line rule prohibiting broadband providers from blocking lawful content, applications, services, or non-harmful devices. This no-blocking principle has long been a cornerstone of the Commission s policies. 239 While first applied in the Internet context as part of the Commission s Internet Policy Statement, the no-blocking concept dates back to the Commission s protection of end users rights to attach lawful, non-harmful devices to communications networks No-Throttling. Second, we adopt a separate bright-line rule prohibiting broadband providers from impairing or degrading lawful Internet traffic on the basis of content, application, service, or use of non-harmful device. This conduct was prohibited under the commentary to the no-blocking rule adopted in the 2010 Open Internet Order. 241 However, to emphasize the importance of this concept we delineate under a separate rule a ban on impairment or degradation, to prevent broadband providers from engaging in behavior other than blocking that negatively impacts consumers use of content, applications, services, and devices. (Continued from previous page) certain no blocking obligations continue to apply to the use of Upper 700 MHz C Block licenses. See 47 C.F.R See, e.g., Comcast Comments at 15 ( As reflected in the existing disclosures of all major broadband providers, including Comcast, there is widespread support and a public commitment from broadband providers to maintain open Internet policies and practices. ); Letter from Forty-Three Municipal Broadband Internet Providers to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , at 1 (filed Feb. 10, 2015) ( Accordingly, we follow the Commission s 2005 Open Internet principles and do not block, throttle, or discriminate among types of Internet traffic; nor do we charge Internet edge providers for priority delivery on our networks. We also comply with the requirement in the Commission s 2010 transparency rule for a unitary set of disclosures covering our service characteristics and network management practices. ); see also AT&T Statement on the U.S. Court of Appeals D.C. Circuit Open Internet Decision, AT&T Public Policy Blog (Jan. 14, 2014) As the FCC assesses the impact of today s court decision, AT&T can assure all of our customers and stakeholders that our commitment to protect and maintain an open Internet will not change. ); Time Warner Cable Issues Statement on Today s Decision by the U.S. Court of Appeals for the D.C. Circuit, Business Wire (Jan. 14, 2014), Today%E2%80%99s-Decision#.VOZuW4vF98H ( Time Warner Cable has been committed to providing its customers the best service possible, including unfettered access to the web content and services of their choice. This commitment, which long precedes the FCC rules, will not be affected by today s court decision. ). 239 Internet Policy Statement, 20 FCC Rcd at , para. 4. See also, e.g., Connect America Fund et al., WC Docket No et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663, 17903, para. 734 (2011) (USF/ICC Transformation Order), aff d sub nom. In re FCC , 753F.3d 1015 (10th Cir. 2014) (reiterating that call blocking is impermissible in intercarrier compensation disputes); Establishing Just and Reasonable Rates for Local Exchange Carriers; Call Blocking by Carriers, WC Docket No , Declaratory Ruling and Order, 22 FCC Rcd 11629, 11629, 31, paras. 1, 6 (Wireline Comp. Bur. 2007) (2007 Declaratory Ruling) (reiterating that call blocking is impermissible as a self-help measure to address intercarrier compensation dispute); Blocking Interstate Traffic in Iowa, Memorandum Opinion and Order, 2 FCC Rcd 2692 (1987) (denying application for review of Bureau order, which required petitioners to interconnect their facilities with those of an interexchange carrier in order to permit the completion of interstate calls over certain facilities). 240 See, e.g., Carterfone, 13 FCC 2d at 424; Computer II, 77 FCC 2d at Open Internet Order, 25 FCC Rcd at 17943, para. 66 ( We make clear that the no-blocking rule bars broadband providers from impairing or degrading particular content, applications, services, or non-harmful devices. ). 46

47 107. No Paid Prioritization. Third, we respond to the deluge of public comment expressing deep concern about paid prioritization. 242 Under the rule we adopt today, the Commission will ban all paid prioritization subject to a narrow waiver process No-Unreasonable Interference/Disadvantage Standard. In addition to these three brightline rules, we also set forth a no-unreasonable interference/disadvantage standard, under which the Commission can prohibit practices that unreasonably interfere with the ability of consumers or edge providers to select, access, and use broadband Internet access service to reach one another, thus causing harm to the open Internet. This no-unreasonable interference/disadvantage standard will operate on a case-by-case basis and is designed to evaluate other current or future broadband Internet access provider policies or practices not covered by the bright-line rules and prohibit those that harm the open Internet Transparency Requirements. We also adopt enhancements to the existing transparency rule to more effectively serve end-user consumers, edge providers of broadband products and services, and the Internet community. These enhanced transparency requirements are modest in nature, and we decline to adopt requirements proposed in the NPRM that raised concern for smaller broadband providers in particular, such as disclosures as to the source of congestion. 1. Clear, Bright Line Rules 110. The record in this proceeding reveals that three practices in particular demonstrably harm the open Internet: blocking, throttling, and paid prioritization. For the reasons described below, we find each of these practices is inherently unjust and unreasonable, in violation of section 201(b) of the Act, and that these practices threaten the virtuous cycle of innovation and investment that the Commission intends to protect under its obligation and authority to take steps to promote broadband deployment under section 706 of the 1996 Act. We accordingly adopt bright-line rules banning blocking, throttling, and paid prioritization by providers of both fixed and mobile broadband Internet access service. 243 a. Preventing Blocking of Lawful Content, Applications, Services, and Non-harmful Devices 111. We continue to find, for the same reasons the Commission found in the 2010 Open Internet Order and reiterated in the 2014 Open Internet NPRM, that the freedom to send and receive lawful content and to use and provide applications and services without fear of blocking is essential to the Internet s openness. 244 Because of broadband providers incentives to block competitors content, the need to protect a consumer s right to access lawful content, applications, services, and to use non-harmful 242 Consumers and small entities generally expressed concern that these arrangements are harmful and should be prevented by the Commission. See, e.g., Anita Barfield Comments at 1 ( Net neutrality is important to me because I do not want my ISP to be able to prioritize the content I see, [and] I am concerned about having my access to information blocked and other content prioritized. ); David Galzerano Comments at 1 ( In ending net neutrality and allowing companies to purchase priority rights when it comes to data transmission, you would not only be eliminating choice and freedom of information for all - which was the pioneering spirit behind the founding of the Internet - you would be relegating ALL data from Independent and rural operators to a second-class state, as these operators would NEVER be able to purchase priority status for any of their data. ); Derek Bass Comments at 1 ( Our long-term economy depends on the free, open access to the internet that we currently have. Allowing privileged corporations fast-track priority will impede innovation and stifle the free exchange of ideas needed to sustain our economy ); Doug Cottrill Comments at 1 ( Companies that are willing and able to pay more should NOT be able to get higher priority for their content, nor should information be slowed down or blocked because of different pricing structures controlled by telecommunications companies. ). 243 See infra Section III.C Open Internet NPRM, 29 FCC Rcd at 5593, para. 89; 2010 Open Internet Order, 25 FCC Rcd at , para

48 devices is as important today as it was when the Commission adopted the first no-blocking rule in In the 2014 Open Internet NPRM, the Commission tentatively concluded that it should re-adopt the text of the vacated no-blocking rule. 246 The record overwhelmingly supports the notion of a no-blocking principle and re-adopting the text of the original rule. 247 Further, we note that many broadband providers still voluntarily continue to abide by the 2010 no-blocking rule, even though they have not been legally required to do so by a rule of general applicability since the Verizon decision. 248 After consideration of the record and guidance from the D.C. Circuit, we adopt the following no-blocking rule applicable to both fixed and mobile broadband providers of broadband Internet access service: A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not block lawful content, applications, services, or nonharmful devices, subject to reasonable network management Similar to the 2010 no-blocking rule, the phrase content, applications, and services again refers to all traffic transmitted to or from end users of a broadband Internet access service, including 245 See supra Section III.B. See also Broadband Internet Technical Advisory Group, Port Blocking at 2 (2013) ( Because Port blocking can affect how particular Internet applications function, its use has the potential to be anti-competitive, discriminatory, otherwise motivated by nontechnical factors, or construed as such. ); Body of European Regulators for Electronic Communications, A View of Traffic Management and Other Practices Resulting in Restrictions to the Open Internet in Europe at 8-9 (May 29, 2012), ( Among the restrictions related to specific types of traffic, the most frequently reported restrictions are the blocking and/or throttling of peer-to-peer (P2P) traffic, on both fixed and mobile networks, and the blocking of Voice over IP (VoIP) traffic, mostly on mobile networks. ). But see WISPA Comments at 22 ( [T]here is no evidence that small businesses are blocking lawful content, applications, services or non-harmful devices, or that their existing network management practices are unreasonable. Small businesses have no business incentive to block content; their main objective is to provide rural Americans with full access to all lawful broadband content and at reasonable and very competitive costs. ) Open Internet NPRM, 29 FCC Rcd at 5593, para A broad cross-section of broadband providers, edge providers, public interest organizations, and individuals support this approach. See, e.g., COMPTEL Reply at 4 (stating that the record reflects broad agreement that the Commission should adopt a no-blocking rule ); IFTA Comments at 10 (supporting the re-adoption of a stand-alone no-blocking rule); Engine Advocacy Comments at 2 (supporting efforts to adopt strict no-blocking and nondiscrimination rules ); OTI Comments at 11 (noting that as the broadband market becomes more consolidated, [t]here is therefore an even greater need for explicit protections against the blocking of lawful content online ); Cogent Comments at 13 ( an ISP blocking access to lawful Internet content is the antithesis of an open Internet ); Cox Comments at 5; MMTC Comments at 11; Letter from Barbara van Schewick to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , 14-28, Attach. at 7 (filed Sept. 19, 2014) (van Schewick Sept. 19, 2014 Ex Parte Letter) (stating a rule to protect against blocking is part of all network neutrality proposals; this is the one rule on which all network neutrality proponents agree ). But see TechFreedom Comments at ( If [broadband providers] are truly nefarious... then public outcry by the affected subscribers should likely be sufficient to convince the ISP to change its practices. ). 248 See, e.g., CenturyLink, High Speed Internet Service Management, (last visited Jan. 29, 2015) ( CenturyLink does not block, prioritize, or degrade any Internet sourced or destined traffic based on application, source, destination, protocol, or port unless it does so in connection with a security practice described in the security policy section below ); RCN, FCC Network Management Disclosure, (last visited Jan. 29, 2015) ( We do not block any lawful content, applications, services, or your use of non-harmful devices. ); Verizon, Terms and Conditions Network Management Guide, (last visited Jan. 29, 2015) ( Verizon Online does not affirmatively manage congestion on the network through mechanisms such as real-time throttling, blocking, or dropping of specific end user traffic. ). 48

49 traffic that may not fit clearly into any of these categories. 249 Further, the no-blocking rule adopted today again applies to transmissions of lawful content and does not prevent or restrict a broadband provider from refusing to transmit unlawful material, such as child pornography or copyright-infringing materials. 250 Today s no-blocking rule also entitles end users to connect, access, and use any lawful device of their choice, provided that the device does not harm the network. 251 The no-blocking rule prohibits network practices that block a specific application or service, or any particular class of applications or services, unless it is found to be reasonable network management. Finally, as with the 2010 no-blocking rule, today s no-blocking rule prohibits broadband providers from charging edge providers a fee to avoid having the edge providers content, service, or application blocked from reaching the broadband provider s end-user customer Rejection of the Minimum Level of Access Standard. The 2014 Open Internet NPRM proposed that the no-blocking rule would prohibit broadband providers from depriving edge providers of a minimum level of access to the broadband provider s subscribers and sought comment on how to define that minimum level of service. 253 After consideration of the record, we reject the minimum level of access standard. Broadband providers, edge providers, public interest organizations, and other parties note the practical and technical difficulties associated with setting any such minimum level of access. 254 For example, some parties note the uncertainty created by an indefinite standard. 255 Other parties observe that in creating any such standard of service for no-blocking, the Commission risks jeopardizing innovation. 256 We agree with these arguments and many others in the record expressing concern with the proposed minimum level of access standard Open Internet Order, 25 FCC Rcd at 17942, para See id. Similar to the 2010 no-blocking rule, this obligation does not impose any independent legal obligation on broadband providers to be the arbiter of what is lawful. Id. at n Id. at , para. 65 & n.202 (noting that a broadband provider may require that devices conform to widely accepted and publicly-available standards applicable to its services and that this rule is not intended to alter existing rules giving end users the right to attach devices to an MVPD system). 252 Id. at , para. 67; see also id. at , paras. 25, 26. We note that during oral argument in the Verizon case, Verizon told the court that in paragraph 64 of the Order the Agency also sets forth the no charging of edge providers rule as a corollary to the no blocking rule, and that s a large part of what is causing us our harm here. In response, Judge Silberman stated, if you were allowed to charge, which are you assuming you're allowed to charge because of the anti-common carrier point of view, if somebody refused to pay then just like in the dispute between C[B]S and Warner, Time Warner... you could refuse to carry. Verizon s counsel responded: [r]ight. Verizon Oral Arg. Tr. at Open Internet NPRM, 29 FCC Rcd at , paras See, e.g., Mozilla Comments at 15 (warning that defining a no-blocking rule in terms of establishing a minimum level of service is not likely to prove effective and workable in practice ); USTelecom Comments at 50 ( the Commission should not impose a minimum level of service for free obligation ); Letter from Catherine J.K. Sandoval, Commissioner, California Public Utilities Commission, to Marlene H. Dortch, Secretary, FCC, GN Docket No , , Attach. at 14 (filed Oct. 14, 2014) (Sandoval Ex Parte Letter) ( [A]ny of the minimum level of access standards the FCC proposes would be insufficient to support the needs of a diversity of Internet users including Critical Infrastructure. ). 255 See, e.g., Microsoft Comments at 19 ( [A] clear no blocking rule rather than some vague, loosely defined standard for measuring a prescribed minimum level of service is critical to maintaining a vibrant and open Internet. ); National Public Radio, Inc. (NPR) Comments at 9 ( Given the rapid evolution of technology, defining a minimum level of service by regulatory fiat would likely become an ongoing undertaking rife with disputes, invariably resulting in repeated judicial intervention. ). 256 Information Technology & Innovation Foundation (ITIF) Comments at 22 (stating that the Commission does not need to define and enforce a minimum level of service because it would be a difficult exercise and may well stifle beneficial practices such as the use of latency-insensitive scavenger class of traffic ); IL and NY (continued.) 49

50 115. The no-blocking rule we adopt today prohibits broadband providers from blocking access to lawful Internet content, applications, services, and non-harmful devices. 257 We believe that this approach will allow broadband providers to honor their service commitments to their subscribers without relying upon the concept of a specified level of service to those subscribers or edge providers under the no-blocking rule. We further believe that the separate no-throttling rule discussed below provides appropriate protections against harmful conduct that degrades traffic but does not constitute outright blocking Application of the No-Blocking Rule to Mobile. In 2010, the Commission limited the noblocking rule for mobile to lawful websites and applications that competed with a provider s voice or video telephony services, subject to reasonable network management. 259 The 2014 Open Internet NPRM, citing the operational constraints that affect mobile broadband services, the rapidly evolving nature of the mobile broadband technologies, and the generally greater amount of consumer choice for mobile broadband services than for fixed, 260 proposed to retain the 2010 no-blocking rule. The Commission sought comment on this proposal For the reasons set forth above, 262 including consumer expectations, the Commission s experience with open Internet regulations in the 700 MHz C Block, and the advances in the mobile broadband industry since 2010, we conclude instead that the same no-blocking rule should apply to both fixed and mobile broadband Internet access services. 263 Accordingly, as with fixed service, a consumer s mobile broadband provider cannot block a consumer from accessing lawful content, applications, services, or non-harmful devices, regardless of whether the content, applications, services, or devices 264 compete with a provider s own offerings, subject to reasonable network management All national mobile broadband providers, among others, opposed the application of the broader no-blocking rule to mobile broadband, arguing, for example, that mobile broadband providers (Continued from previous page) Comments at 9 ( A minimum level of access necessarily implies that a higher or preferential level of service will become available, creating the very two-tiers of service that the Proposed Rules are intended to prevent. ) Open Internet NPRM, 29 FCC Rcd at 5597, para. 101 (asking if the Commission should define the minimum level of access from the perspective of end users, edge providers, or both ). 258 See infra Section III.C.1.b; Access Comments at 6 (drawing a distinction between outright blocking and slowing or throttling end-user access to certain content, services, or applications) Open Internet Order, 25 FCC Rcd at , , paras , Open Internet NPRM, 29 FCC Rcd at 5594, para Id. at 5598, para See supra Section III.B See American Association of Law Libraries (AALL) Comments at 3; ADT Comments at 9; NMR Comments at 30; Voices for Internet Freedom Comments at 6; EFF Comments at 24 ( Mobile device owners should enjoy the same levels of control and choice for networked applications on their mobile devices as they do on their laptops and desktops. ); Higher Education and Libraries Comments at 18-19; OTI Comments at 62; Sandvine Comments at 9 (arguing that reasonable network management permits mobile operators to treat traffic differently than fixed networks do); i2coalition Comments at 41; TIA Comments at 20-21; but see AT&T Comments at 19; Cisco Comments at 22; CTIA Comments at 17 (citing capacity constraints); Mobile Future Reply at 2-3; Verizon Comments at 43-44; Sprint Reply at 23; T-Mobile Comments at In evaluating the reasonable network management exception to the no-blocking rule, the Commission will drawing upon its experience with the no-blocking rule in the 700 MHz C Block. See 700 MHz Second Report and Order, 22 FCC Rcd at , paras ; see also Verizon Wireless to Pay $1.25 Million to Settle Investigation into Blocking of Consumers Access to Certain Mobile Broadband Applications, News Release, July 31, 2012, (regarding tethering applications for C Block network customers). 50

51 need the ability to block unwanted traffic 265 and spam. 266 They also argue that the particular challenges of managing a mobile broadband network, for example the unknown effects of apps, 267 require additional flexibility to block traffic. 268 As discussed below, 269 we recognize that additional flexibility may be required in mobile network management practices, but find that the reasonable network management exception we adopt today allows sufficient flexibility: the blocking of harmful or unwanted traffic remains a legitimate network management purpose, and is permissible when pursued through reasonable network management practices. b. Preventing Throttling of Lawful Content, Applications, Services, and Non-harmful Devices 119. In the 2014 Open Internet NPRM, the Commission proposed that degradation of lawful content or services below a specified level of service would violate a no-blocking rule. 270 While certain broadband Internet access provider conduct may result in degradation of an end user s Internet experience that is tantamount to blocking, we believe that this conduct requires delineation in an explicit rule rather than through commentary as part of the no-blocking rule. 271 Thus, we adopt a separate no-throttling rule applicable to both fixed and mobile providers of broadband Internet access service: A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not impair or degrade lawful Internet traffic on the basis of Internet content, application, or service, or use of a non-harmful device, subject to reasonable network management With the no-throttling rule, we ban conduct that is not outright blocking, but inhibits the delivery of particular content, applications, or services, or particular classes of content, applications, or services. 272 Likewise, we prohibit conduct that impairs or degrades lawful traffic to a non-harmful device or class of devices. We interpret this prohibition to include, for example, any conduct by a broadband Internet access service provider that impairs, degrades, slows down, or renders effectively unusable 265 AT&T Reply at 34-35; Sprint Reply at 22-23; T-Mobile Comments at 11, 13 (arguing that [w]ireless broadband providers need flexibility to address network security and reliability risks, as well as other threats to public safety and the consumer experience ); Verizon Comments at 43-44;CTIA Comments at See, e.g., Verizon Comments at 4; Interisle Consulting Group Comments 27 ( [I]f blocking were banned, then spammers would be able to dramatically increase the volume of traffic they send. Other security problems could also be worsened. ). 267 See, e.g., Verizon Comments at 44 ( The Open Internet Order appropriately recognized that the download and use of a mobile application presents unique network management issues. ). 268 See CTIA Comments at See infra Section III.D Open Internet NPRM, 29 FCC Rcd at 5593, para. 89 ( So long as broadband providers do not degrade lawful content or service to below a minimum level of access, they would not run afoul of the proposed rule. ). 271 See, e.g., Letter from the Honorable Henry A. Waxman to Tom Wheeler, Chairman, FCC, GN Docket No , (filed Oct. 3, 2014) (Waxman Oct. 3, 2014 Ex Parte Letter) (proposing separate no blocking and no-throttling rules); WGAW Comments at 22 (noting that throttling may in some cases constitute a more subtle practice[] that achieve[s] the goal of blocking ); Mozilla Reply at 3 ( There is general agreement that these rules should include a rule that prevents access network operators from blocking ordinary, lawful traffic, and some form of a nondiscrimination rule on limiting, throttling, or prioritizing traffic. ). 272 See, e.g., Letter from Barbara van Schewick, Professor of Law and (by courtesy) Electrical Engineering, Stanford Law School, et al., to Marlene Dortch, Secretary, FCC, GN Docket Nos , Attach. at 4 (filed Feb. 18, 2015) (van Schewick Feb. 18, 2015 Ex Parte Letter) ( [T]he no-throttling rule should explicitly ban discrimination against applications AND classes of applications (so-called application-specific discrimination). ). 51

52 particular content, services, applications, or devices, that is not reasonable network management. 273 For purposes of this rule, the meaning of content, applications, and services has the same as the meaning given to this phrase in the no-blocking rule. 274 Like the no-blocking rule, broadband providers may not impose a fee on edge providers to avoid having the edge providers content, service, or application throttled. 275 Further, transfers of unlawful content or unlawful transfers of content are not protected by the no-throttling rule. 276 We will consider potential violations of the no-throttling rule under the enforcement provisions outlined below We find that a prohibition on throttling is as necessary as a rule prohibiting blocking. Without an equally strong no-throttling rule, parties note that the no-blocking rule will not be as effective because broadband providers might otherwise engage in conduct that harms the open Internet but falls short of outright blocking. For example, the record notes the existence of numerous practices that broadband providers can engage in to degrade an end user s experience Because our no-throttling rule addresses instances in which a broadband provider targets particular content, applications, services, or non-harmful devices, it does not address a practice of slowing down an end user s connection to the Internet based on a choice made by the end user. For instance, a broadband provider may offer a data plan in which a subscriber receives a set amount of data at one speed tier and any remaining data at a lower tier. 278 If the Commission were concerned about the particulars of a data plan, it could review it under the no-unreasonable interference/disadvantage standard. 279 In contrast, if a broadband provider degraded the delivery of a particular application (e.g., a disfavored VoIP service) or class of application (e.g., all VoIP applications), it would violate the bright-line no-throttling rule. We note that user-selected data plans with reduced speeds must comply with our transparency rule, such that the limitations of the plan are clearly and accurately communicated to the subscriber The no-throttling rule also addresses conduct that impairs or degrades content, applications, or services that might compete with a broadband provider s affiliated content. For example, if a broadband provider and an unaffiliated entity both offered over-the-top applications, the no-throttling rule would prohibit broadband providers from constraining bandwidth for the competing over-the-top offering to prevent it from reaching the broadband provider s end user in the same manner as the affiliated application See infra Section III.D.3; see also Waxman Oct. 3, 2014 Ex Parte Letter at 10, n.32 ( The term throttling is not limited to the technique of slowing down or delaying Internet packets, but more broadly refers to methods that can be used to differentiate, or shape Internet traffic. ). 274 See supra Section III.C.1.a. 275 See supra para Id.; see also 2010 Open Internet Order, 25 FCC Rcd at , para. 67; see also id. at , paras. 25, See, e.g., Cogent Comments at 17 ( There are numerous practices a last-mile broadband ISP can undertake short of outright blocking an edge provider that can degrade an end user s experience with and thus likelihood to seek out in the future services offered by a particular edge provider. ); NARUC Comments at 6 ( [L]imiting, or otherwise degrading broadband access for users... is an unfair practice that may reduce the Internet s value to consumers. ); see also supra Section III.B. 278 See, e.g., T-Mobile, Simple Choice Plan, (last visited Feb. 5, 2015) (offering 1GB, 3GB, and 5GB plans with lower data speeds after the threshold is reached). 279 See infra Sections III.C.2; III.D Vimeo Comments at 11 (citing a 2011 study noting that A rebuffering rate of 1% (i.e., a video pauses for 1 out of every 100 seconds) results in 5% less video watched overall. There is a 2-second rule for video watching: People are willing to wait 2 seconds for a video to load, but the rate of abandonment increases significantly thereafter if the video doesn t load. Viewer patience is influenced by the expectation of speed from the viewing (continued.) 52

53 124. As in the 2010 Open Internet Order, we continue to recognize that in order to optimize the end-user experience, broadband providers must be permitted to engage in reasonable network management practices. We emphasize, however, that to be eligible for consideration under the reasonable network management exception, a network management practice that would otherwise violate the nothrottling rule must be used reasonably and primarily for network management purposes, and not for business purposes. 281 c. No Paid Prioritization 125. In the 2014 Open Internet NPRM, the Commission sought comment on suggestions to impose a flat ban on paid prioritization services, including whether all paid prioritization practices, or some of them, could be treated as per se violations of the commercially-reasonable standard or any other standard based on any source of legal authority. 282 For reasons explained below, we conclude that paid prioritization network practices harm consumers, competition, and innovation, as well as create disincentives to promote broadband deployment and, as such, adopt a bright-line rule against such practices. Accordingly, today we ban arrangements in which the broadband service provider accepts consideration (monetary or otherwise) from a third party to manage the network in a manner that benefits particular content, applications, services, or devices. We also ban arrangements where a provider manages its network in a manner that favors the content, applications, services or devices of an affiliated entity. 283 Any broadband provider that engages in such practices will be subject to enforcement action, including forfeitures and other penalties. 284 We adopt the following rule banning paid prioritization arrangements: A person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not engage in paid prioritization. Paid prioritization refers to the management of a broadband provider s network to directly or indirectly favor some traffic over other traffic, including through use of techniques such as traffic shaping, prioritization, resource reservation, or other forms of preferential traffic management, either (a) in exchange for consideration (monetary or otherwise) from a third party, or (b) to benefit an affiliated entity The paid prioritization ban we adopt today is based on the record that has developed in this proceeding. The record is rife with commenter concerns regarding preferential treatment arrangements, with many advocating a flat ban on paid prioritization. 285 Commenters assert that permitting paid prioritization will result in the bifurcating of the Internet into a fast lane for those (Continued from previous page) platform and the perceived value of the content. Bad viewing experiences lead not just to abandonment of a particular video, but also to a lower rate of watching other videos. ); Golden Frog Comments at 5-6 (discussing allegations of anti-competitive behavior by broadband service providers, including those involving blocking and throttling). 281 See infra Section III.D.3. While not within the definition of throttling for purposes of our no-throttling rule, the slowing of subscribers content on an application agnostic basis, including as an element of subscribers purchased service plans, will be evaluated under the transparency rule and the no-unreasonable interference/disadvantage standard. 282 See 2014 Open Internet NPRM, 29 FCC Rcd at 5609, para We consider arrangements of this kind to be paid prioritization, even when there is no exchange of payment or other consideration between the broadband Internet access service provider and the affiliated entity. 284 Other forms of traffic prioritization, including practices that serve a public safety purpose, may be acceptable under our rules as reasonable network management. See infra Section III.D See, e.g., Internet Association Comments at 16; Y Combinator Comments at 3; Reddit Comments at 11; Ben Holt Comments at 1; Consumers Union Comments at 5; AALL Comments at 3; AAPD Comments at 4. 53

54 willing and able to pay and a slow lane for everyone else. 286 As several commenters observe, allowing for the purchase of priority treatment can lead to degraded performance in the form of higher latency, increased risk of packet loss, or, in aggregate, lower bandwidth for traffic that is not covered by such an arrangement. 287 Commenters further argue that paid prioritization will introduce artificial barriers to entry, distort the market, harm competition, 288 harm consumers, 289 discourage innovation, 290 undermine 286 See, e.g., Higher Education and Libraries Comments at 12 ( Many institutions that serve the public interest, such as libraries, colleges and universities, may not be able to afford to pay extra fees simply for the transmission of their content and could find their Internet traffic relegated to chokepoints. ); Rural Broadband Policy Group Comments at 9 ( Allowing Internet service providers to sell fast lanes to those who can afford them would permit the redlining of rural towns and customers who cannot pay for the fast lanes. ); Vimeo Comments at 9-10 (stating that [i]f broadband providers can make marginal revenue from priority access fees, they will have little incentive to maintain a high-quality standard lane experience for edge providers unwilling or unable to pay ); Public Knowledge Comments at 37 ( Because the fast lane will produce premium revenue for ISPs, ISPs have every incentive to construct a slow lane that performs poorly enough to justify extra payments from those edge services who can afford to do so. ); Engine Advocacy Reply at 5 ( [P]aid prioritization schemes, once implemented, will result in Internet fast lanes for well-heeled incumbents, relegating startups and the economic growth they create to the slow lane. ). 287 See Mozilla Comments at 20 ( Prioritization is inherently a zero-sum practice, and inherently creates fast and slow lanes and prevents a level playing field. ); Mozilla Reply at 15; Sandvine Comments at 9 ( At a moment in time, there is a fixed amount of bandwidth available to all applications, content, etc. on a given network. If one application has paid for more of that bandwidth (and this is how the priority is achieved) then there is less best efforts bandwidth remaining for all other applications and content. ). But see ADTRAN Reply at ii, 6, 16 (arguing that the zero-sum game theory is incorrect because it ignores the fact that broadband providers capacity is not static); Letter from Justin (Gus) Hurwitz, Assistant Professor, University of Nebraska College of Law, to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 1 (filed Nov. 3, 2014) (asserting that prioritization is not zero sum ). 288 See, e.g., Ad Hoc Comments at 19-20; Mozilla Reply at 16 (arguing that paid prioritization creates perverse incentives because underinvestment in infrastructure is more appealing if the result is increased sales of a prioritized offering balancing out any loss in direct subscribers ); CDT Comments at 6 ( By degrading some traffic or prioritizing other traffic, broadband providers could effectively play favorites in the online marketplace, distorting competition among online content and applications. ); Letter from Edyael Casaperalta, Rural Broadband Policy Group Coordinator, National Rural Assembly, to Marlene H. Dortch, Secretary, FCC, GN Docket Nos and , at 3 (filed Oct. 20, 2014) (expressing concern that permitting paid prioritization and a fast lane will place rural companies at a competitive disadvantage); Letter from Austin C. Schlick, Director, Communications Law, Google, to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , (filed Nov. 5, 2014) (asserting that paid prioritization could create incentives for providers to maintain scarcity and congestion on their networks, in order to sell services that avoid these artificial conditions ); Vonage Reply at See, e.g., CCIA Reply at (asserting that paid prioritization will harm consumers because these fees will be passed through to consumers); COMPTEL Comments at 10; Higher Education and Libraries Comments at 12 (asserting that it is likely that those who are able to pay for preferential treatment will pass along their costs to their consumers and/or subscribers. In some cases, libraries and other public institutions may be among these subscribers who would then be forced to pay more for services they may broker on behalf of their patrons ); Internet Association Comments at 17; AOL Comments at 6-7; Free Press Comments at 25; Vermont Reply at 8; Letter from Erin P. Fitzgerald, Rural Wireless Association to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 1 (filed Nov. 14, 2014) (noting that widespread paid prioritization arrangements could further adversely impact competition and harm consumers ). But see Hance Haney Comments at 9 ( Scholars have observed that as states have reduced in-state long-distance access fees, the market induces carriers to pass-through most of the reduction in access rates. There appears to be no reason to believe that a similar dynamic wouldn t occur in the context of a twosided broadband market. ). 290 See, e.g., Internet Association Comments at 17; Engine Advocacy Comments at 5 (explaining that if a startup s site does not load as quickly or its application is not as reliable, it will be harmed because [u]sers will switch to competitors whose services receive better treatment, [u]sers will spend less money on e-commerce sites or view fewer pages on sites that garner advertising revenue through the number of page-views, and chill initial capital investment ); Linear Air Reply at 3-4; National Venture Capital Association Comments at 2. 54

55 public safety and universal service, 291 and harm free expression. 292 Vimeo, for instance, argues that paid prioritization would disadvantage user-generated video and independent filmmakers that lack the resources of major film studios to pay priority rates for dissemination of content. 293 Engine Advocacy meanwhile asserts that [s]ome unfunded early startups may not be able to afford [to pay for priority treatment] (particularly if the product would be data-intensive) and will not start a company, resulting in reduce[d] entrepreneurship. 294 Commenters assert that if paid prioritization became widespread, it would make reliance on consumers ordinary, non-prioritized access to the Internet an increasingly unattractive and competitively nonviable option. 295 The Commission s conclusion is supported by a wellestablished body of economic literature, 296 including Commission staff working papers It is well-established that broadband providers have both the incentive and ability to engage in paid prioritization. 298 In its Verizon opinion, the D.C. Circuit noted that providers have powerful incentives to accept fees from edge providers, either in return for excluding their competitors or for granting them prioritized access to end users. 299 Indeed, at oral argument Verizon s counsel 291 See, e.g., Sandoval Ex Parte Letter at 2 (asserting that paid prioritization undermines public safety and universal service, and increases barriers to adopting Internet-based applications such as Internet-enabled demand response communications electric and gas utilities use to prevent power blackouts, forestall the need to build fossil-fueled power plants, promote environmental sustainability, and manage energy resources). 292 See, e.g., Illinois and NY Comments at 6 (asserting that [i]f broadband providers can discriminate among content, they can effectively pick winners and losers, interfering with the public s ability to freely educate itself about political, cultural, and social issues education that is critical to our democracy ); Ad Hoc Comments at 20 (asserting that paid prioritization would distort consumers choices among content and edge providers); Church World Service et al. Reply at 1; Independent Filmmaker Organizations Reply at 3-6; City of Los Angeles Comments at Vimeo Comments at 12 (capitalization omitted). 294 Engine Advocacy Comments at See, e.g., CDT Comments at 18; Reddit Comments at 7; Y Combinator Comments at 2-3; Tumblr Reply at 8 ( [E]ven if a slow lane remains reasonably fast, marginal differences in upload and streaming speeds moving forward would deter people from using slower services, and severely punish companies that cannot pay for prime access. ); Vimeo Comments at 11 ( [M]erely having a fast-lane for paid traffic will alter consumers perception of the standard for speed, [because w]hen consumers become accustomed to receiving video at a certain delivery rate, that rate will become the de facto standard and everything else will be perceived as substandard. Consumers are unlikely to know (or care) about why a particular video takes two seconds to load or is constantly rebuffering, and will abandon those edge providers that they perceive as providing a slower and thus less enjoyable experience. ); Kickstarter Comments at 3-4 ( Users will not accept slow load times and choppy videos. ). 296 The access provided by the core network is an intermediate input into the myriad of final products produced by edge providers. While it is granted that for a firm selling final goods, price discrimination can be both profitable and enhance welfare, it has been argued that the reverse is also true when intermediate goods are considered. See Michael L. Katz, Price Discrimination and Monopolistic Competition, 52 Econometrica 1453, (1984); Michael L. Katz, Non-Uniform Pricing, Output and Welfare under Monopoly, 50 Rev. of Economic Studies 37, (1983); Michael L. Katz, The Welfare Effects of Third-Degree Price Discrimination in Intermediate Good Markets, 77 American Economic Rev. 154, (1987); and Yoshihiro Yoshida, Third Degree Price Discrimination in Input Markets: Output and Welfare, 90 American Economic Rev. 240, (2000). 297 Gerald W. Brock, Telephone Pricing to Promote Universal Service and Economic Freedom, OPP Working Paper Series No. 18 (1986); Jay M. Atkinson and Christopher C. Barnekov, A Competitively Neutral Approach to Network Interconnection, OPP Working Paper Series, No. 34 (2000). 298 See supra Section III.B.2.a. 299 Verizon, 740 F.3d at (holding that the Commission has adequately supported and explained its conclusions that absent open Internet protections, broadband providers represent a threat to Internet openness and could act in ways that would ultimately inhibit the speed and extent of future broadband deployment ). 55

56 announced that but for [the 2010 Open Internet Order] rules we would be exploring [such] commercial arrangements. 300 While we appreciate that several broadband providers have claimed that they do not engage in paid prioritization 301 or that they have no plans to do so, 302 such statements do not have the force of a legal rule that prevents them from doing so in the future. The future openness of the Internet should not turn on the decision of a particular company. We are concerned that if paid prioritization practices were to become widespread, the damage to Internet openness could be difficult to reverse. We agree that [u]nraveling a web of discriminatory deals after significant investments have been made, business plans have been built, and technologies have been deployed would be a complicated undertaking both logistically and politically. 303 Further, documenting the harms could prove challenging, as it is impossible to identify small businesses and new applications that are stifled before they become commercially viable. 304 Prioritizing some traffic over others based on payment or other consideration from an edge provider could fundamentally alter the Internet as a whole by creating artificial motivations and constraints on its use, damaging the web of relationships and interactions that define the value of the Internet for both end users and edge providers, and posing a risk of harm to consumers, competition, and innovation. 305 Thus, because of the very real concerns about the chilling effects that preferential treatment arrangements could have on the virtuous cycle of innovation, consumer demand, and investment, we adopt a bright-line rule banning paid prioritization arrangements Verizon Oral Arg. Tr. at 31 ( I m authorized to state by my client [Verizon] today that but for these rules we would be exploring those commercial arrangements, but this order prohibits those, and in fact would shrink the types of services that will be available on the Internet. ). 301 See, e.g., AT&T Comments at 30-31; Verizon Comments at 37; Sandvine Comments at 3 ( [T]o the best of our knowledge, none of the innovative service plans that Sandvine has helped implement across our customer base have involved payments between operators and edge providers for traffic priority so-called Pay for Priority. ); Letter from Randal S. Milch, Executive Vice President, Public Policy and General Counsel, Verizon, to Chairman Patrick J. Leahy, Committee on the Judiciary, U.S. Senate (Oct. 29, 2014) (Verizon Letter to Leahy). Further, these broadband providers argue that they have no incentive to engage in paid prioritization arrangements, as their own business plans depend upon an open Internet. See, e.g., Verizon Comments at 5-10; Comcast Comments at 5-6; AT&T Comments at 21; Cox Comments at i; TWC Comments at 2; Charter Comments at 9; Cequel Reply at 3 (explaining that it could not block an edge-based content provider without diminishing the value of its Internet service and losing customers to the formidable competitors it faces ). 302 For example, we note that in Verizon s letter to Chairman Leahy, the company states [a]s we have said before, and affirm again here, Verizon has no plans to engage in paid prioritization of Internet traffic. Verizon Letter to Leahy at 1. However, in contrast to this statement, at oral argument in the Verizon case, counsel for Verizon explained that the company would pursue such arrangements if not for the 2010 Open Internet rules which prevented them. See supra note CDT Comments at See, e.g., CDT Comments at 5; Etsy Comments at 8 ( [Under the proposed rules] many new startups that would have been founded will die in their infancy or never be created. How do you account for all the innovations that would never come to market because of these new rules? ); Reddit Comments at 9-10 ( If the Chairman s proposal had been law in 2005, reddit might not have gotten off the ground. ); CodeCombat Comments at 5-7; Heyzap Comments at See, e.g., ACLU Comments at 7 ( Were paid prioritization or other differential treatment permitted, edge providers with a first mover advantage would be able to entrench their market position on the edge, and then to pass along any overcharge imposed by broadband providers to consumers in their fees. The big content, application or device providers would be able to afford greater, faster or better access to broadband consumers while newer competitors would be put at an ever-growing disadvantage. ). 306 Some commenters argue that consumer disclosures about such practices are sufficient. See, e.g., Bright House Comments at 29. However, the average consumer does not have the time or specialized knowledge to sort through the implications, and regardless, in many areas of the country, consumers simply do not have multiple, equivalent (continued.) 56

57 128. In arguing against such a ban, ADTRAN asserts that it would cement the advantages enjoyed by the largest edge providers that presently obtain the functional equivalent of priority access by constructing their own extensive networks that interconnect directly with the ISPs. 307 We reject this argument. CDT correctly observes that [e]stablished entities with substantial resources will always have a variety of advantages over less established ones, 308 notwithstanding any rules we adopt. We do not seek to disrupt the legitimate benefits that may accrue to edge providers that have invested in enhancing the delivery of their services to end users. On the contrary, such investments may contribute to the virtuous cycle by stimulating further competition and innovation among edge providers, to the ultimate benefit of consumers. We also clarify that the ban on paid prioritization does not restrict the ability of a broadband provider and CDN to interconnect We find that a flat ban on paid prioritization has advantages over alternative approaches identified in the record. 310 Prohibiting this practice outright will help to foster broadband network investment by setting clear boundaries of acceptable and unacceptable behavior. It will also protect consumers against a harmful practice that may be difficult to understand, even if disclosed. In addition, this approach relieves small edge providers, innovators, and consumers of the burden of detecting and challenging instances of harmful paid prioritization. 311 Given the potential harms to the virtuous cycle, (Continued from previous page) choices. See Illinois and NY Comments at Further, as discussed above, switching costs can be a substantial deterrent. See supra Section III.B ADTRAN Reply at CDT Comments at 5; see also Intel Reply at 10 ( Absent persuasive evidence of anti-competitive conduct, companies that are disadvantaged by such innovation deserve no special assistance or protection. To do otherwise would frustrate competition and innovation, harming American consumers and business. ). 309 Letter from Scott Blake Harris, Counsel to Akamai, to Marlene H. Dortch, Secretary, FCC, GN Docket No (filed Feb. 9, 2015) (requesting that the final Open Internet Order should expressly state that CDN services do not constitute prioritization as that term has been used in this proceeding ). 310 For example, AOL proposes to permit individual negotiations for priority services, but would prohibit them where the broadband provider is affiliated with an upstream edge provider; has market power; and also charges end users (i.e., no double-charging). AOL Comments at 5-8. AT&T proposes, as one option for addressing paid prioritization, the imposition of additional transparency, no-blocking, and nondiscrimination rules on fixed broadband Internet access providers that do not agree voluntarily to refrain from entering into paid prioritization arrangements. AT&T Comments at 37-38; see also American Cable Association (ACA) Reply at 18 (stating that AT&T s proposal appears to offer both adequate protections to edge providers and end users, while giving broadband ISPs the needed flexibility to manage their networks and create innovative service offerings ). Comcast proposes a rebuttable presumption against paid prioritization arrangements that would entirely preclude exclusive arrangements and arrangements that prioritize a broadband provider s own affiliated Internet content vis-à-vis unaffiliated content and place a heavy burden on the broadband provider to justify any other paid prioritization arrangement. Comcast Comments at See, e.g., ebay Comments at 4-5; CCIA Comments 31-32; CCIA Reply at (expressing concern that the commercially reasonable standard will necessarily increase the costs of seeking relief from unlawful conduct, and will thus contravene the Commission s stated goal of providing meaningful enforcement measures to small businesses); Kickstarter Comments at 3 ( We would have no real recourse if we were offered an unfair price. Using our small legal team or hiring outside counsel to prove that an offered deal was commercially unreasonable... would take far too long and cost far too much to be a feasible option. ); CCIA Reply at ( Putting the onus on edge providers, most of whom lack regulatory and legal experience anywhere comparable to that of [broadband providers], to show anticompetitive conduct through individual administrative proceedings will almost certainly lead to a situation where edge providers (particularly startups and smaller companies) cannot avail themselves of the protections provided in this rulemaking. ); Netflix Comments at 10 ( Weighing the cost of an administrative proceeding and the uncertainty of success, many edge providers likely will choose to forego engagement with the Commission. ); Y Combinator Comments at 3 ( No startup has the funds and lawyers and economists to take on billion-dollar ISPs in an FCC action based on the vague legal standards in the proposal. Indeed, the startup ecosystem needs a bright-line, per se rule against discrimination. ); Free Press Comments at 136 ( This regime (continued.) 57

58 we believe it is more appropriate to impose an ex ante ban on such practices, while entertaining waiver requests under exceptional circumstances Under our longstanding waiver rule, the Commission may waive any rule in whole or in part, for good cause shown. 312 General waiver of the Commission s rules is appropriate only if special circumstances warrant a deviation from the general rule, and such a deviation will serve the public interest. 313 In some cases, however, the Commission adopts specific rules concerning the factors that will be used to examine a waiver or exemption request. 314 We believe that such guidance is appropriate here to make clear the very limited circumstances in which the Commission would be willing to allow paid prioritization. Accordingly, we adopt a rule concerning waiver of the paid prioritization ban that establishes a balancing test, as follows: The Commission may waive the ban on paid prioritization only if the petitioner demonstrates that the practice would provide some significant public interest benefit and would not harm the open nature of the Internet In support of any waiver request, the applicant therefore must make two related showings. First, the applicant must demonstrate that the practice will have some significant public interest benefit, such as providing evidence that the practice furthers competition, innovation, consumer demand, or investment. Second, the applicant must demonstrate that the practice does not harm the nature of the open Internet, including, but not limited to, providing evidence that the practice: does not materially degrade or threaten to materially degrade the broadband Internet access service of the general public; does not hinder consumer choice; does not impair competition, innovation, consumer demand, or investment; and does not impede any forms of expressions, types of service, or points of view An applicant seeking waiver relief under this rule faces a high bar. We anticipate granting such relief only in exceptional cases. 315 (Continued from previous page) would shift the burden to prove such practices commercially unreasonable onto Internet users and edge providers who can least afford to bear that burden. ); MobileWorks Reply at C.F.R See WAIT Radio v. FCC, 418 F.2d 1153, 1159 (D.C. Cir. 1969); Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990). 314 See, e.g., 47 C.F.R. 79.1(f) ( Procedures for exemptions [from closed captioning requirements] based on economically burdensome standard. ). 315 For instance, several commenters argue that paid prioritization arrangements could improve the provision of telemedicine services. See, e.g., California Telehealth Network (CTN) Reply at 7, 9 (explaining that as full motion synchronous video conferencing becomes more necessary for digital diagnosis and treatment, as required by many telehealth services, the total bandwidth consumption in the Internet ecosystem for telehealth will grow, encouraging investment and deployment); AALL Comments at 2 ( Health sciences libraries also provide Internet access to images that support telemedicine, particularly in remote areas where Internet service can be disproportional or uneven and to reach the underserved. ); MMTC Comments at 11 (arguing that the Commission should employ a rebuttable presumption against paid prioritization... while ensuring that such presumption can be overcome by business models that sufficiently protect consumers and have the potential to benefit consumer welfare, such as telemedicine applications). We note that telemedicine services might alternatively be structured as non-bias data services, which are beyond the reach of the open Internet rules. See infra Section III.D.3. 58

59 2. No Unreasonable Interference or Unreasonable Disadvantage Standard for Internet Conduct 133. In the 2014 Open Internet NPRM, the Commission tentatively concluded that it should adopt a rule requiring broadband providers to use commercially reasonable practices in the provision of broadband Internet access service, and sought comment on this approach. 316 The Commission also sought comment on whether there were alternative legal standards that the Commission should consider, 317 or whether it should adopt a rule that prohibits unreasonable discrimination and, if so, what legal authority and theories it should rely upon to do so. 318 In addition, the Commission sought comment on how it can ensure that the rule it adopts sufficiently protects against harms to the open Internet, including broadband providers incentives to disadvantage edge providers or classes of edge providers in ways that would harm Internet openness The Commission sought comment on what factors it should adopt to ensure commercially reasonable practices that will protect and promote Internet openness, and tentatively concluded that a review of the totality of the circumstances should be preserved to ensure that rules can be applied evenly and fairly in response to changing circumstances. 320 The Commission also recognized that there have been significant changes in the mobile marketplace since 2010, and sought comment on whether and, if so, how these changes should affect the Commission s treatment of mobile services under the rules Preventing Unreasonable Interference or Unreasonable Disadvantage that Harms Consumers and Edge Providers. The three bright-line rules that we adopt today prohibit specific conduct that harms the open Internet. The open nature of the Internet has allowed new products and services to flourish and has broken down geographic barriers to communication, allowing information to flow freely. We believe the rules we adopt today will alleviate many of the concerns identified in the record regarding broadband provider practices that could upset these positive outcomes. However, while these three bright-line rules comprise a critical cornerstone in protecting and promoting the open Internet, we believe that there may exist other current or future practices that cause the type of harms our rules are intended to address. For that reason, we adopt a rule setting forth a no-unreasonable interference/disadvantage standard, under which the Commission can prohibit, on a case-by-case basis, practices that unreasonably interfere with or unreasonably disadvantage the ability of consumers to reach the Internet content, services, and applications of their choosing or of edge providers to access consumers using the Internet It is critical that access to a robust, open Internet remains a core feature of the communications landscape, but also that there remains leeway for experimentation with innovative offerings. Based on our findings that broadband providers have the incentive and ability to discriminate in their handling of network traffic in ways that can harm the virtuous cycle of innovation, increased enduser demand for broadband access, and increased investment in broadband network infrastructure and Open Internet NPRM, 29 FCC Rcd at 5602, para The Commission also tentatively concluded that it should operate separately from the proposed no-blocking rule, i.e., conduct acceptable under the no-blocking rule would still be subject to independent examination under the commercially reasonable standard, and sought comment on this approach. Id. at 5602, para Id. at 5603, para Id. at 5604, para Id. 320 Id. at , paras Id. at , para. 62. Specifically, the Commission sought comment on whether, under the commercially reasonable rule, mobile networks should be subject to the same totality-of-the circumstances test as fixed broadband, and whether the Commission should apply the commercially reasonable legal standard to mobile broadband. Id. at 5609, para

60 technologies, 322 we conclude that a no-unreasonable interference/disadvantage standard to protect the open nature of the Internet is necessary. We adopt this standard to prohibit practices in the broadband Internet access provider s network that harm Internet openness, similar to the approach proposed by the Higher Education coalition and the Center for Democracy and Technology. 323 Specifically, we require that Any person engaged in the provision of broadband Internet access service, insofar as such person is so engaged, shall not unreasonably interfere with or unreasonably disadvantage (i) end users ability to select, access, and use broadband Internet access service or the lawful Internet content, applications, services, or devices of their choice, or (ii) edge providers ability to make lawful content, applications, services, or devices available to end users. Reasonable network management shall not be considered a violation of this rule This no-unreasonable interference/disadvantage standard will be applied to carefully balance the benefits of innovation against harm to end users and edge providers. It also protects free expression, thus fulfilling the congressional policy that the Internet offer[s] a forum for true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity. 325 As the Commission found in 2010, and the Verizon court upheld, [r]estricting edge providers ability to reach end users, and limiting end users ability to choose which edge providers to patronize, would reduce the rate of innovation at the edge and, in turn, the likely rate of improvements to network infrastructure. Similarly, restricting the ability of broadband providers to put the network to innovative uses may reduce the rate of improvements to network infrastructure. 326 Under the standard that we adopt today, the Commission can protect against harm to end users or edge providers ability to use broadband Internet access service to reach one another. 327 Compared to the no unreasonable discrimination standard adopted by the Commission in 2010, the standard we adopt today is specifically designed to protect against harms to the open nature of the Internet. We note that the standard we adopt today represents our interpretation of sections 201 and 202 in the broadband Internet access context and, independently, our interpretation upheld by the Verizon court that rules to protect Internet openness promote broadband deployment via the virtuous cycle under section 706 of the 1996 Act See supra Section III.B See, e.g., Higher Education and Libraries Comments at (proposing a standard more directly related to the unique and open character of the Internet, what they termed Internet reasonable ); CDT Comments at 19; CDT Reply at As in the no throttling rule, we include classes of content, applications, services, or devices U.S.C. 230(a)(3) Open Internet Order, 25 FCC Rcd at 17911, para. 14; see also Higher Education and Libraries Comments at 23 (stating that the Internet itself is fundamentally an ecosystem that supports a myriad of personal, institutional, community, and commercial relationships and interests, and, as with any other ecosystem, if the conditions that foster those relationships and interests are negatively impacted, the system as a whole is subject to collapse ). 327 See, e.g., Akamai Comments at 11 ( [T]he Commission should take only those actions that are necessary and narrowly tailored to promote competition, innovation, and the growth of broadband networks that inure to benefit the public. ). 328 See 47 U.S.C. 201, 202, 208; see also Section IV; AT&T Corp. v. Business Telecom, Inc.; Sprint Comms. Company, L.P. v. Business Telecom, Inc., EB-01-MD-001, EB-01-MD-002, Memorandum Opinion and Order, 16 FCC Rcd (2001) (granting in part a complaint filed under section 208 that a telecommunications service provider s access rates were and are unjust and unreasonable under section 201(b) of the Act). 60

61 a. Factors to Guide Application of the Rule 138. We adopt our tentative conclusion to follow a case-by-case approach, considering the totality of the circumstances, when analyzing whether conduct satisfies the no-unreasonable interference/disadvantage standard to protect the open Internet. 329 Below we discuss a non-exhaustive list of factors we will use to assess such practices. In adopting this standard, we enable flexibility in business arrangements and ensure that innovation in broadband and edge provider business models is not unduly curtailed. 330 We are mindful that vague or unclear regulatory requirements could stymie rather than encourage innovation, 331 and find that this approach combined with the factors set out below will provide sufficient certainty and guidance to consumers, broadband providers, and edge providers particularly smaller entities that might lack experience dealing with broadband providers while also allowing parties flexibility in developing new services. 332 We note that in addition to the following list, there may be other considerations relevant to determining whether a particular practice violates the no-unreasonable interference/disadvantage standard. This approach of adopting a rule of general conduct, followed by guidance as to how to apply it on a case-by-case basis, is not novel. The Commission took a similar approach in 2010 when it adopted the no unreasonable discrimination rule, which was followed by a discussion of four factors (end-user control, use-agnostic discrimination, standard practices, and transparency). 333 Indeed, for this new rule, we are providing at least as much guidance, if not more, as we did in 2010 for the application of the no unreasonable discrimination rule End-User Control. A practice that allows end-user control and is consistent with promoting consumer choice is less likely to unreasonably interfere with or cause an unreasonable disadvantage affecting the end user s ability to use the Internet as he or she sees fit. 334 The Commission has long recognized that enabling consumer choice is the best path toward ensuring competitive markets, economic growth, and technical innovation. 335 It is therefore critical that consumers decisions, rather Open Internet NPRM, 29 FCC Rcd at 5608, para. 136; CDT and ALA Reply at This is in contrast to the inflexibility that the Verizon court found was a flaw in the 2010 unreasonable discrimination standard. See supra note 96. We also note that this approach addresses concerns in the record that [a] general conduct rule, applied on a case-by-case basis with the only touchstone being whether a given practice harms consumers or edge providers, may lead to years of expensive litigation to determine the meaning of harm (for those who can afford to engage in it). Letter from Corynne McSherry, Intellectual Property Director, EFF, to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 1 (filed Feb. 19, 2015) (EFF Feb. 19, 2015 Ex Parte Letter). Understanding that such an unfocused approach could harm the results of our rule, we spell out, in advance, the contours and limits of [the] rule, as was suggested in the record. See, e.g., id. 331 See, e.g., Akamai Comments at 10; CALinnovates Reply at 19 (stating that regulatory clarity may significantly affect the calculus of current and potential investors ); Higher Education and Libraries Reply at (asserting that a clearly articulated standard focused on preserving the existing Internet would set expectations and provide guidance to the market, but would avoid hard and fast rules that might be too rigid for a rapidly changing broadband ecosystem); CDT and ALA Reply at CDT and ALA Reply at 2. We also note that this Order permits parties to seek advisory opinions regarding application of the Commission s open Internet rules. We view these processes as complementary methods by which parties can seek guidance as to how the open Internet rules apply to particular conduct. See infra Section III.E Open Internet Order, 25 FCC Rcd at , paras Id. at 17944, para. 71; see also EFF Feb. 19, 2015 Ex Parte Letter at 2 (suggesting that the Commission should take into consideration whether the practice preserves user choice ). 335 See supra Section III.A; see also, e.g., Verizon Comments at 16-17; Syntonic Reply at 5-6; van Schewick Feb. 18, 2015 Ex Parte Letter, Attach. at 14 ( Letting users, not network providers, choose which applications will be successful is an important part of the mechanism that produces innovation under uncertainty. At the same time, letting users choose how they want to use the network enables them to use the Internet in a way that creates more value for them (and for society) than if network providers made this choice for them. ). 61

62 than those of service providers, remain the driving force behind the development of the Internet. 336 To this end, practices that favor end-user control and empower meaningful consumer choice are more likely to satisfy the no-unreasonable interference/disadvantage standard than those that do not. However, as was true in 2010, we are cognizant that user control and network control are not mutually exclusive, and that many practices will fall somewhere on a spectrum from more end-user-controlled to more broadband provider-controlled. 337 Further, there may be practices controlled entirely by broadband providers that nonetheless satisfy the no-unreasonable interference/disadvantage standard. In all events, however, we emphasize that such practices should be fully transparent to the end user and effectively reflect end users choices Competitive Effects. As the Commission has found previously, broadband providers have incentives to interfere with and disadvantage the operation of third-party Internet-based services that compete with the providers own services. 338 Practices that have anti-competitive effects in the market for applications, services, content, or devices would likely unreasonably interfere with or unreasonably disadvantage edge providers ability to reach consumers in ways that would have a dampening effect on innovation, interrupting the virtuous cycle. As such, these anticompetitive practices are likely to harm consumers and edge providers ability to use broadband Internet access service to reach one another. Conversely, enhanced competition leads to greater options for consumers in services, applications, content, and devices, and as such, practices that would enhance competition would weigh in favor of promoting consumers and edge providers ability to use broadband Internet access service to reach one another. 339 In examining the effect on competition of a given practice, we will also review the extent of an entity s vertical integration as well as its relationships with affiliated entities Consumer Protection. The no-unreasonable interference/disadvantage standard is intended to serve as a strong consumer protection standard. It prohibits broadband providers from employing any deceptive or unfair practice that will unreasonably interfere with or disadvantage end-user consumers ability to select, access, or use broadband services, applications, or content, so long as the services are lawful, subject to the exception for reasonable network management. For example, unfair or deceptive billing practices, as well as practices that fail to protect the confidentiality of end users proprietary information, will be unlawful if they unreasonably interfere with or disadvantage end-user consumers ability to select, access, or use broadband services, applications, or content, so long as the services are lawful, subject to the exception for reasonable network management. While each individual case will be evaluated on its own merits, this rule is intended to include protection against fraudulent practices such as cramming and slamming that have long been viewed as unfair and disadvantageous to consumers. 336 See Netflix Comments at 5 ( Through an open Internet, the consumer, not the ISP or the edge provider, picks the winners and the losers. ); Vonage Comments at 13 ( Allowing ISPs to select winners and losers will certainly chill investment and innovation in startups because they will lack the ability to develop a following among users without getting past the ISP gatekeeper. ); AT&T Comments at (distinguishing beneficial user-directed prioritization agreements from harmful paid-prioritization agreements initiated by service providers); Ad Hoc Comments at Notably, under section 230(b) of the Communications Act, increased user control is an express objective of modern telecommunications policy. 47 U.S.C. 230(b)(3) (directing policymakers to encourage the development of technologies which maximize user control over what information is received by individuals... who use the Internet and other interactive computer services ) Open Internet Order, 25 FCC Rcd at , para See supra Section III.B.2.a; 2010 Open Internet Order, 25 FCC Rcd at 17916, para. 22. The Commission adopted a similar restriction to address harms raised by the Comcast-NBCU transaction. See Comcast/NBCU Merger Order, 26 FCC Rcd at 4275, para. 94 ( [N]either Comcast nor Comcast-NBCU shall prioritize affiliated Internet content over unaffiliated Internet content. ). 339 See, e.g., Verizon Comments at 35; Free State Reply at 3 ( The welfare of consumers should be the focus and deciding criterion for Commission broadband policy. ); Free State Reply at

63 142. Effect on Innovation, Investment, or Broadband Deployment. As the Verizon court recognized, Internet openness drives a virtuous cycle in which innovations at the edges of the network enhance consumer demand, leading to expanded investments in broadband infrastructure that, in turn, spark new innovations at the edge. 340 As such, practices that stifle innovation, investment, or broadband deployment would likely unreasonably interfere with or unreasonably disadvantage end users or edge providers use of the Internet under the legal standard we set forth today Free Expression. As Congress has recognized, the Internet offer[s] a forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual activity. 342 Practices that threaten the use of the Internet as a platform for free expression would likely unreasonably interfere with or unreasonably disadvantage consumers and edge providers ability to use BIAS to communicate with each other, thereby causing harm to that ability. Further, such practices would dampen consumer demand for broadband services, disrupting the virtuous cycle, and harming end user and edge provider use of the Internet under the legal standard we set forth today Application Agnostic. Application-agnostic (sometimes referred to as use-agnostic) practices likely do not cause an unreasonable interference or an unreasonable disadvantage to end users or edge providers ability to use BIAS to communicate with each other. 344 Application-agnostic practices do not interfere with end users choices about which content, applications, services, or devices to use, nor 340 Verizon, 740 F.3d at See, e.g., EFF Feb. 19, 2015 Ex Parte Letter at 2 (suggesting that the Commission should take into consideration whether and how the practice impacts the cost of innovation ); Letter from Vimeo, LLC, et al. to Marlene H. Dortch, Secretary, FCC, GN Docket No (filed Feb. 19, 2014) (asking that the general conduct rule take into consideration whether a challenged practice keeps application development and innovation costs low ); see also Akamai Reply at 2 ( Innovative traffic platforms and networks have thus been key in facilitating the virtuous circle through which increased broadband Internet usage drives increased investment by service and content providers, which in turn drives further usage. ); Nokia Reply at 5 ( It is important that the Commission recognize that operators and infrastructure providers are a critical element of this virtuous cycle of innovation. ); Nokia Reply at 8 ( Value creation in all segments of the broadband marketplace is a critical component of maintaining the level of innovation seen in the last decade. ) U.S.C. 230(a)(3); see also Reno v. ACLU, 521 U.S. 844, 853 (1997) ( No single organization controls any membership in the Web, nor is there any single centralized point from which individual Web sites or services can be blocked from the Web. ) (internal citation omitted). 343 See, e.g., AAJC Comments at 2; ACLU Comments at 2 ( As information technology advances apace, the meaningful exercise of our constitutional rights including the freedoms of speech, assembly, press and the right to petition government has become literally dependent on broadband Internet access. ); American Public Media Group Comments at 3; CDT Comments at 5; OTI Comments at 3; see also EFF Feb. 19, 2015 Ex Parte Letter at 2 (suggesting that the Commission should take into consideration whether and how the practice impacts the cost of free speech ). We also note that the no-unreasonable interference/disadvantage standard does not unconstitutionally burden any of the First Amendment rights held by broadband providers because broadband providers are conduits, not speakers, with respect to broadband Internet access services. See infra Section VI.A. 344 A network practice is application-agnostic if it does not differentiate in treatment of traffic, or if it differentiates in treatment of traffic without reference to the content, application, or device. A practice is application-specific if it is not application-agnostic. Application-specific network practices include, for example, those applied to traffic that has a particular source or destination, that is generated by a particular application or by an application that belongs to a particular class of applications, that uses a particular application- or transport- layer protocol, or that has particular characteristics (e.g., the size, sequencing, and/or timing of packets). See 2010 Open Internet Order, 25 FCC Rcd at 17938, para. 56 (application-specific); id. at 17945, para. 73 (application-agnostic); BITAG Congestion Report at 19 (discussing which traffic is subject to congestion management); see also, e.g., van Schewick Sept. 19, 2014 Ex Parte Letter, Attach. at 24; Mozilla Reply at 22; i2 Coalition Comments at 43; OTI Comments at iv. We note, however, that there do exist circumstances where application-agnostic practices raise competitive concerns, and as such may violate our standard to protect the open Internet. See infra para

64 do they distort competition and unreasonably disadvantage certain edge providers. 345 As such, they likely would not cause harm by unreasonably interfering with or disadvantaging end users or edge providers ability to communicate using BIAS Standard Practices. In evaluating whether a practice violates our no-unreasonable interference/disadvantage standard to protect Internet openness, we will consider whether a practice conforms to best practices and technical standards adopted by open, broadly representative, and independent Internet engineering, governance initiatives, or standards-setting organization. 346 Consideration of input from technical advisory groups accounts for the important role these organizations have to play in developing communications policy. 347 We make clear, however, that we are not delegating authority to interpret or implement our rules to outside bodies. b. Application to Mobile 146. As discussed earlier, because of changes that have occurred in the mobile marketplace since 2010, including the widespread deployment of 4G LTE networks and the significant increase in use of mobile broadband Internet access services, we find that it is appropriate to revise our approach for mobile broadband and apply the same openness protections to both fixed and mobile broadband Internet access services, including prohibiting mobile broadband providers from engaging in practices that harm Internet openness. 348 We find that applying the no-unreasonable interference/disadvantage standard to mobile broadband services will help ensure that consumers using mobile broadband services are protected against provider practices that would unreasonably restrict their ability to access a free and open Internet AT&T, T-Mobile, and Verizon oppose application of a commercially reasonable practices rule to mobile broadband networks. They argue that competition in the mobile broadband market already ensures that service providers have no incentive to discriminate. 349 CTIA argues that applying a commercial reasonableness standard would deter innovation and limit the ability of providers to differentiate themselves in the marketplace because providers would have to factor in the risk of complaints and investigations. 350 Nokia argues that the Commission should ensure that its rules allow a range of service options. 351 Free State recommends that if the Commission adopts a legally enforceable standard, it should establish a presumption that mobile network management practices benefit consumer welfare and that presumption could only be overcome by actual evidence of anticompetitive conduct See 2010 Open Internet Order, 25 FCC Rcd at , para. 73; van Schewick Sept. 19, 2014 Ex Parte Letter; Van Schewick April 17 Ex Parte Letter, Attach. at 3-4; OTI Comments at iv (asserting that the Commission should allow application-agnostic discrimination); see also CDT Comments at 7; Common Cause Comments at 8-9; EFF Feb. 19, 2015 Ex Parte Letter at 2 (suggesting that the Commission should take into consideration whether the practice is application agnostic ); but see ITIF Comments at 17, n.36 ( While Comcast s current transparent, application agnostic network management practices are likely preferable over application specific congestion management, in some cases application specific management may be necessary. ). 346 See 2010 Open Internet Order, 25 FCC Rcd at 17946, para See Comcast Comments at 70 (noting the benefits of government-industry collaboration in telecommunications policymaking); ITIF Comments at 20; Verizon Comments at 17; WISPA Comments at 35; Mozilla Reply at 22; MDTC Comments at 5-6; see also 2010 Open Internet Order, 25 FCC Rcd at 17946, para See infra Section III.D. 349 AT&T Reply at 74-75; T-Mobile Reply at 7; Verizon Reply at CTIA Reply at 27-30; Letter from Scott Bergmann, Vice President Regulatory Affairs, CTIA to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , 14-28, at 3 (filed Oct. 3, 2014). 351 Nokia Reply at Free State Reply at 3. 64

65 148. We find that even if the mobile market were sufficiently competitive, competition alone is not sufficient to deter mobile providers from taking actions that would limit Internet openness. As noted above, there have been incidents where mobile providers have acted in a manner inconsistent with open Internet principles and we find that there is a risk that providers will continue to have the incentive to take actions that would favor their own content or services. 353 We also agree with commenters that mobile providers need for flexibility to manage their network can be accommodated through the reasonable network management exception In addition, we find that applying the no-unreasonable interference/disadvantage standard to mobile broadband will not affect providers ability to differentiate themselves in the marketplace. We have crafted the standard we adopt today to prohibit these practices that harm Internet openness while still permitting innovation and experimentation. Nothing in the standard restricts carriers from developing new services or implementing new business models. c. Rejection of the Commercially Reasonable Standard 150. Based on the record before us, we are persuaded that adopting a legal standard prohibiting commercially unreasonable practices is not the most effective or appropriate approach for protecting and promoting an open Internet. 355 Internet openness involves many relationships that are not business-to-business and serves many purposes that are noncommercial. 356 Commenters also expressed concerns that the commercially reasonable standard would involve a multifactor framework that was not focused on the goals of this open Internet proceeding. 357 In addition, some commenters expressed concern that the legal standard would require permission before innovation, thus creating higher barriers to entry and attendant transaction costs. 358 Smaller edge providers expressed concern that they do not have the resources to fight against commercially unreasonable practices, which could result in an unfair playing field before the Commission. 359 Still others argued that the standard would permit paid 353 See supra Section III.B CDT Comments at See, e.g., CDT Comments at 19; Free Press Comments at 8-9; Public Knowledge Comments at 31; MLB Advanced Media Comments at 2-3; Microsoft Comments at 13-14; Internet Association Comments at 16; Sandoval Ex Parte Letter at 2 (asserting that the commercial reasonableness rule would deter investment and Internet applications, such as Internet-enabled Smart beds, which read a patient s vital signs and send aggregated data on available beds to mass casualty and disaster planners who use this information to determine which hospital has an available bed in a burn unit). 356 CDT Comments at 18-19; see also Higher Education and Libraries Reply at 9-10; CDT and ALA Comments at 1. In the data roaming context, two commercial entities deal directly with one another to negotiate a fee-for-service agreement, and there is a direct business relationship with contractual privity and a purely commercial purpose on both sides of the transaction. Open Internet protections, by contrast, apply to a context where there may be no direct negotiation and no direct agreement between key parties. Moreover, while broadband providers are commercial entities with commercial purposes, many of the parties seeking to route traffic to broadband subscribers are not. CDT Comments at 18-19; see also AARP Comments at 37 (noting the difficulty of analyzing broadband providers relationships with millions of different edge providers under a data roaming-style commercially reasonable rubric). 357 See, e.g., AARP Comments at 35-38; ADTRAN Comments at 26-28; Internet Association Comments at See, e.g., Ad Hoc Comments at (a commercially reasonable standard will necessarily be complex, inexact, and massively fact-driven ); Consumers Union Reply at 2-3 (commercially reasonable standard is vague and unenforceable, and allows individualized negotiations to be left to private parties with motivations that may not necessarily be in the interest of consumers); ebay Comments at See, e.g., Tumblr Reply at 10 ( Tumblr cannot afford to engage in what would likely be multi-year challenges against the biggest broadband providers, with large legal teams experienced in telecommunications law, simply to secure access for its users equal to that of its current, and future, competitors with deeper resources. ); Etsy Comments at 7 (arguing that a prohibition on commercially unreasonable transactions creates an unacceptable level (continued.) 65

66 prioritization, which could disadvantage smaller entities and individuals. 360 Given these concerns, we decline to adopt our proposed rule to prohibit practices that are not commercially reasonable. Instead, as discussed above, we adopt a governing standard that looks to whether consumers or edge providers face unreasonable interference or unreasonable disadvantages, and makes clear that the standard is not limited to whether a practice is agreeable to commercial parties. d. Sponsored Data and Usage Allowances 151. While our bright-line rule to treat paid prioritization arrangements as unlawful addresses technical prioritization, the record reflects mixed views about other practices, including usage allowances and sponsored data plans. Sponsored data plans (sometimes called zero-rating) enable broadband providers to exclude edge provider content from end users usage allowances. On the one hand, evidence in the record suggests that these business models may in some instances provide benefits to consumers, with particular reference to their use in the provision of mobile services. Service providers contend that these business models increase choice and lower costs for consumers. 361 Commenters also assert that sophisticated approaches to pricing also benefit edge providers by helping them distinguish themselves in the marketplace and tailor their services to consumer demands. 362 Commenters assert that such sponsored (Continued from previous page) of uncertainty for small companies and will be too costly to enforce ); Reddit Comments at 8; Engine Advocacy Comments at 15; CodeCombat Comments at See, e.g., Illinois and NY Comments at 5-84; CCIA Reply at 17; i2coaltion Comments at 10 ( Start-ups that require priority service may not be able to bring their product to market without significant outside investment and investors will be affected by the increased equity needs of entrepreneurs. ); AAJC Comments at 5 ( A commercially reasonable standard where certain forms of prioritization are allowed benefits those with financial resources. Such prioritization would negatively impact many minority entrepreneurs who come from historically disadvantaged communities with lower incomes and educational opportunities.... ). 361 See, e.g., T-Mobile Reply at 17 (asserting that its Music Freedom program, which allows consumers to stream music without it counting against their data plan, is innovative and pro-consumer and that Music Freedom does not discriminate among streaming music services ); Verizon Reply at (contending that T-Mobile s Music Freedom, along with other similar initiatives, are evidence that consumer choice and competition have ensured a differentiated marketplace ); CTIA Reply at 36; Sandvine Comments at 3-4, 7 (arguing that zero-rated applications have helped some people who otherwise could not afford access to some of their favorite services); Telefonica Reply at 7; Cequel Reply at 2, 6-7 ( Usage-based billing is not only a fair method of pricing, it is necessary for Suddenlink to bring broadband services to the often-remote communities that it serves.... If the FCC were to restrict usage-based billing, it would be restricting the future of broadband services in the very rural areas where it is trying to extend service. ); Verizon Reply at 22 (asserting that usage-based pricing provides a way for consumers who are not heavy users to keep their costs down); ITIF Reply at 16 (arguing that zero rating arrangements are likely welfare-enhancing, offering a service that meets consumer demand at a lower price point and noting that they may be structured in an application neutral manner that allow[s] consumers to continue to access new innovations at the edge ); Verizon Comments at 30-31, 34 (asserting that arrangements that address only pricing could make service cheaper for end users, enabling them to access more content when and where they want it, and could provide a way for interested content providers to promote and encourage use of their services ); Free State Reply at 3-4, 13; Syntonic Wireless Reply at 9; GAO Report at 26 (explaining that participants in all eight groups agreed that they would be more likely to access content that does not count toward their data limits than content that does). 362 See, e.g., USTelecom Reply at 46-47; Verizon Comments at 29-36; Ericsson Comments at 6-8, 14; ICLE & TechFreedom Comments at 16-41; ITIF Comments at 13-15; ARRIS Comments at 7-10; ADTRAN Reply at 5-13; Qualcomm Comments at 8-9; Sandvine Comments at 6-8; Free State Reply at ( [T]he reality is that in order for the next Google or the next Facebook to compete against those well-entrenched giants, the putative new entrant might well be looking to negotiate some arrangement with a service provider that will give it a fighting chance of competing with the entrenched giants by differentiating itself. ); Syntonic Wireless Reply at 9-10 (explaining that sponsored content is a way to differentiate one s product from the competition, and thus adds an additional plane of competition within edge provider markets); AT&T Reply at 77-78; CTIA Reply at ( As the CEO of music streaming site Grooveshark remarked when T-Mobile added the company to the list of supported (continued.) 66

67 data arrangements also support continued investment in broadband infrastructure and promote the virtuous cycle, 363 and that there exist spillover benefits from sponsored data practices that should be considered. 364 On the other hand, some commenters strongly oppose sponsored data plans, arguing that the power to exempt selective services from data caps seriously distorts competition, favors companies with the deepest pockets, and prevents consumers from exercising control over what they are able to access on the Internet, again with specific reference to mobile services. 365 In addition, some commenters argue that sponsored data plans are a harmful form of discrimination. 366 The record also reflects concerns that such arrangements may hamper innovation and monetize artificial scarcity. 367 (Continued from previous page) services, Music Freedom helps make little-known offerings available to a wider customer base[.] ); Telefonica Reply at 7; Letter from Susie Kim Riley, CEO, Aquto, Harjot Saluja, CEO, DataMi, Scott Schill, Producer, BBA Studios, Sam Gadodia, CEO LotusFlare, Gary Greenbaum, CEO, Syntonic, and Mike Nasco, CEO, Wazco, to Marlene H. Dortch, Secretary, FCC, GN Docket No et al., at 1 (filed Jan. 22, 2015) ( Sponsored data and zero-rating arrangements hold great promise for content and edge providers, whether they are new entrants or incumbents, who can use them to promote innovative offerings, attract new customers, and grow a robust subscriber base. ). 363 See, e.g., Verizon Comments at 31; Alcatel-Lucent Comments at (asserting that sponsored data plans give consumers the opportunity to experience better service at no personal cost, which could facilitate a consumer experiencing the value of higher-tier service and adopting that higher-tier going forward and that [t]his increased consumer adoption would benefit the entire broadband ecosystem ); AT&T Reply at (sponsored data plans can promote Internet openness by encouraging consumers to explore mobile online applications and content that they might otherwise not use); Verizon Reply at 22 (explaining that usage-based pricing promotes broadband adoption by enabling customers to pay only for the services they wish to use, without having to subsidize higherend users ); CWA/NAACP Comments at 16-18; National Minority Organization Comments at 9; Free State Reply at 4, 13; CenturyLink Comments at 5-7 ( A two-sided market approach ensures that the costs of content and applications causing greater bandwidth consumption are ultimately passed on to the subscribers who use those services, ensures that adequate pricing signals are communicated to edge providers and, overall, produces the optimal economic outcome. ). 364 See Sandvine Comments at 6-7; Roslyn Layton Reply at 4 ( [A] content provider may want to subsidize the delivery of its content so that it can maximize viewing and viewers. We see this in the case of a health provider which wants to ensure that low-income pregnant women watch a series of pre-natal videos, a preventative form of health care that improves infant and mother outcomes. Similarly a health care provider would be willing to subsidize a mobile subscription of its members to encourage adoption of preventative health care and monitoring tools. The cost of avoiding an adverse health event is well worth the price of a broadband subscription. The health care member benefits with better health outcome and the health care provider reduces costs. ). 365 Consumers Union Reply at 5; NPR Comments at 11 (arguing that such sponsored services and data caps discourage consumers from using their mobile devices to access the vital content provided by public radio via websites and apps ); Letter from John Bergmayer, Public Knowledge to Marlene H. Dortch, Secretary, FCC, MB Docket Nos , 14-90, GN Docket Nos , , , 13-5, , 09-51, WC Docket Nos , 10-90, 96-45, , at 3 (filed Nov. 13, 2014) ( Mobile users behavior is shaped in part by billing practices and pricing structures. As Horrigan finds, among the 55% of smartphone users with a data cap, more than half 52% have altered their online behavior because of the cap either by not doing some online activities out of concern for hitting the limit or by waiting until they were in Wi-Fi range. ). 366 See, e.g., CFA Comments at 39 (describing AT&T s sponsored data plan on its mobile network as a form of discrimination); Consumers Union Comments at 13 (explaining that [e]xempting certain affiliated services from data caps does not provide consumers with a meaningful choice. Instead, it pushes them to watch affiliated content out of fear that doing otherwise will count against their monthly caps and result in either overage charges or slower speeds ). 367 See, e.g., Public Knowledge Comments at 21 (recounting concerns about harming innovation in relation to AT&T s sponsored data plan and T-Mobile s recently announced Music Freedom service); id. at 53 (arguing that AT&T s Sponsored Data program allows it to monetize artificial scarcity and creates a disincentive to increase caps over time ); WGAW Reply at (explaining that sponsored data services require content providers and (continued.) 67

68 152. We are mindful of the concerns raised in the record that sponsored data plans have the potential to distort competition by allowing service providers to pick and choose among content and application providers to feature on different service plans. 368 At the same time, new service offerings, depending on how they are structured, could benefit consumers and competition. Accordingly, we will look at and assess such practices under the no-unreasonable interference/disadvantage standard, based on the facts of each individual case, and take action as necessary The record also reflects differing views over some broadband providers practices with respect to usage allowances (also called data caps ). 369 Usage allowances place limits on the volume of data downloaded by the end user during a fixed period. Once a cap has been reached, the speed at which the end user can access the Internet may be reduced to a slower speed, or the end user may be charged for excess data. 370 Usage allowances may benefit consumers by offering them more choices over a greater range of service options, and, for mobile broadband networks, such plans are the industry norm today, in part reflecting the different capacity issues on mobile networks. 371 Conversely, some commenters have expressed concern that such practices can potentially be used by broadband providers to disadvantage competing over-the-top providers. 372 Given the unresolved debate concerning the benefits and drawbacks of data allowances and usage-based pricing plans, 373 we decline to make blanket findings about these (Continued from previous page) applications to pay for the data usage, but does nothing to address the capacity constraints so widely touted as problematic by wireless carriers ); Letter from Ademir Antonio Pereira, Jr. to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , , Attach. at 7-8 (filed Feb. 19, 2015). 368 See supra para. 151; see also Public Knowledge Comments at 21, See, e.g., CWA/NAACP Comments at 18-19; CFA Comments at 39 (expressing concern regarding Comcast s exemption of Xfinity online video app on Xbox and TiVo from data caps in 2012); Consumers Union Comments at 8; NPR Comments at 11; Nokia Comments at 8-10 (stating that [t]he existence of data caps impacts content and OTT companies because these entities see a decline in traffic to their websites, applications, and other service platforms as the month progresses due to rationing by the consumer ); Public Knowledge Comments at (asserting that usage-based billing could enable broadband providers to create metered and unmetered lanes, supposedly no different than the fast and slow lanes feared with paid prioritization); Roku Comments at 8; Telecommunications for the Deaf and Hard of Hearing et al Comments at iii, 15 (urging the Commission to consider the disproportionate impact of data caps on people who are deaf or hard of hearing, who depend on dataintensive applications for basic communications ); T-Mobile Reply at (describing consumer benefits of its Simple Choice plan); Writers Guild of America East and AFL-CIO Comments at 25; Tumblr Reply at See, e.g., U.S. Government Accountability Office, Report, Broadband Internet: FCC Should Track the Application of Fixed Internet Usage-Based Pricing and Help Improve Consumer Education, GAO , at 8 (Nov. 2014) (GAO Report). 371 See, e.g., T-Mobile Reply at (noting that customers on T-Mobile s Simple Choice plan can choose plans with unlimited high-speed data, or an allotment of high-speed data with unlimited data at 2G speeds after their allotment is used and arguing that such plans are designed to allow subscribers to decide what price they want to pay for what service, and still use as much mobile data as they want without incurring overage charges... ). 372 See, e.g., Public Knowledge Comments at 51-52; Consumer s Union Reply at 5 ( If the largest mobile carriers exempt certain uses from their data caps, the effect is to push consumers to watch affiliated content out of fear that doing otherwise will count against their monthly caps. ). 373 Regarding usage-based pricing plans, there is similar disagreement over whether these practices are beneficial or harmful for promoting an open Internet. Compare Bright House Comments at 20 ( Variable pricing can serve as a useful technique for reducing prices for low usage (as Time Warner Cable has done) as well as for fairly apportioning greater costs to the highest users. ) with Public Knowledge Comments at 58 ( Pricing connectivity according to data consumption is like a return to the use of time. Once again, it requires consumers keep meticulous track of what they are doing online. With every new web page, new video, or new app a consumer must consider how close they are to their monthly cap.... Inevitably, this type of meter-watching freezes innovation. ), and ICLE & TechFreedom Policy Comments at 32 ( The fact of the matter is that, depending on background conditions, either usage-based pricing or flat-rate pricing could be discriminatory. ). 68

69 practices and will address concerns under the no-unreasonable interference/disadvantage on a case-bycase basis. 3. Transparency Requirements to Protect and Promote Internet Openness 154. In this section, we adopt enhancements to the existing transparency rule, which covers both content and format of disclosures by providers of broadband Internet access service. As the Commission has previously noted, disclosure requirements are among the least intrusive and most effective regulatory measures at its disposal. 374 We find that the enhanced transparency requirements adopted in the present Order serve the same purposes as those required under the 2010 Open Internet Order: providing critical information to serve end-user consumers, edge providers of broadband products and services, and the Internet community. The transparency rule, including the enhancements adopted today, also will aid the Commission in enforcing the other open Internet rules and in ensuring that no service provider can evade them through exploitation of narrowly-drawn exceptions for reasonable network management or through evasion of the scope of our rules In the 2014 Open Internet NPRM, we tentatively concluded that we should enhance the existing transparency rule for end users, edge providers, the Internet community, and the Commission to have the information they need to understand the services they receive and to monitor practices that could undermine the open Internet. 375 The NPRM sought comment on a variety of possible enhancements, including whether to require tailored disclosures for specific constituencies (end users, edge providers, the Internet community); ways to make the content and format of disclosures more accessible and understandable to end users; specific changes to disclosures for network practices that would benefit edge providers; whether there are more effective or more comprehensive ways to measure network performance; whether to require providers to disclose meaningful information regarding source, location, speed, packet loss, and duration of congestion; and whether and how any enhancements should apply to mobile broadband providers in a manner different from their application to fixed broadband providers Based on the record compiled in response to those proposals, below we set forth targeted, incremental enhancements to the existing transparency rule. We first recap the existing transparency rule, which forms the baseline off of which we build today. Having established that baseline, we describe specific enhancements including refinements and expansions in the required disclosures of commercial terms, performance characteristics, and network practices; adoption of a requirement that broadband providers notify end users directly if their individual use of a network will trigger a network practice, based on their demand prior to a period of congestion, that is likely to have a significant impact on the use of the service. We then address a request to exempt small providers from enhancements to the transparency rule, discuss the relationship of the enhancements to the existing transparency rule, and note the role that we anticipate further guidance from Commission staff will continue to play in applying the transparency rule in practice. Lastly, we adopt a voluntary safe harbor (but not a requirement) for a 374 See 2014 Open Internet NPRM, 29 FCC Rcd at 5585, para. 66; see also, e.g., Howard Beales, Richard Craswell & Steven C. Salop, The Efficient Regulation of Consumer Information, 24 J. L. & Econ. 491 at 513 (1981); Howard Beales, Richard Craswell & Steven C. Salop, Information Remedies for Consumer Protection, 71 Am. Econ. Rev. 410 at 411 (Papers & Proceedings, May 1981); Alissa Cooper, How Regulation and Competition Influence Discrimination in Broadband Traffic Management: A Comparative Study of Net Neutrality in the United States and United Kingdom, at Section (Sept. 2013), ( A policy of requiring ISPs to publicly disclose the details of their traffic management practices, whether combined with additional regulation or not, has enjoyed widespread support. ) (Cooper Thesis); see also Letter from Kathleen Grillo, Senior Vice President, Federal Regulatory Affairs, Verizon, to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , 14-28, at 1 (filed Mar. 24, 2014) (arguing that the Commission should rely primarily on consumer choice, competition, and transparency to guide Commission policy ) (emphasis added) Open Internet NPRM, 29 FCC Rcd at 5586, para Id. at , paras. 68, 72, 76, 80, 83,

70 standalone disclosure format that broadband providers may use in meeting the existing requirement to disclose information that meets the needs of end users. a. The Existing Transparency Rule 157. The D.C. Circuit in Verizon upheld the transparency rule, which remains in full force, applicable to both fixed and mobile providers. 377 In enhancing this rule, we build off of the solid foundation established by the Open Internet Order. In that Order, the Commission concluded that effective disclosure of broadband providers network management practices, performance, and commercial terms of service promotes competition, innovation, investment, end-user choice, and broadband adoption. 378 As a result, the Commission adopted a transparency rule requiring both fixed and mobile providers to publicly disclose accurate information regarding the network management practices, performance, and commercial terms of their broadband Internet access service. 379 The rule specifies that such disclosures be sufficient for consumers to make informed choices regarding the use of such services and for content, application, service, and device providers to develop, market, and maintain Internet offerings The 2010 Open Internet Order went on to provide guidance on both the information to be disclosed and the method of disclosure. 381 Within each category of required disclosure (network management practices, performance characteristics, and commercial terms), the Open Internet Order described the type of information to be disclosed. For example, under performance characteristics, the Commission specified, among other things, disclosure of expected and actual access speed and latency as well as the impact of specialized services. 382 All disclosures were required to be made timely and prominently[,] in plain language accessible to current and prospective end users and edge providers, the Commission, and third parties who wish to monitor network management practices for potential violations of open Internet principles In 2011 and 2014, Commission staff provided guidance on interpreting the transparency rule. For example, in addition to other points, the 2011 guidance issued by the Enforcement Bureau and Office of General Counsel (2011 Advisory Guidance) described the means by which fixed and mobile broadband providers should meet the requirement to disclose actual performance of the broadband Internet access services they offer and to disclose network management practices, performance, characteristics, and commercial terms at the point of sale. 384 The 2011 Advisory Guidance also clarified the statement in the Open Internet Order that effective disclosures will likely include some or all of the 377 See Verizon, 740 F.3d at 659. In the 2014 Open Internet NPRM, we concluded that we have ample authority not only for our existing transparency rules, but also for the enhanced transparency rules we propose today, whether the Commission ultimately relies on section 706, Title II, or another source of legal authority. See 2014 Open Internet NPRM, 29 FCC Rcd at 5585, para See 2010 Open Internet Order, 25 FCC Rcd at , para. 56 (concluding that effective disclosures will include information concerning: (1) network practices, including, for example, congestion management and security measures; (2) performance characteristics, including a general description of system performance (such as speed and latency); and (3) commercial terms, including pricing, privacy policies, and redress options). 379 Id. at 17937, para. 54; see also 47 C.F.R C.F.R See 2010 Open Internet Order, 25 FCC Rcd at , 17959, paras , Id. at 17939, para Id. 384 FCC Enforcement Bureau and Office of General Counsel Issue Advisory Guidance for Compliance with Open Internet Transparency Rule, GN Docket No , WC Docket No , Public Notice, 26 FCC Rcd 9411 (2011) (2011 Advisory Guidance). 70

71 information listed in paragraphs 56 and 98, but also that the list was not necessarily exhaustive, nor is it a safe harbor, and that there may be additional information, not included [in paragraphs 56 and 98], that should be disclosed for a particular broadband service to comply with the rule in light of relevant circumstances. 385 Acknowledging the concern of some providers that they could be liable for failing to disclose additional types of information that they may not be aware are subject to disclosure, the 2011 Advisory Guidance stated that disclosure of the information described in those paragraphs will suffice for compliance with the transparency rule at this time In an advisory issued in July 2014 (2014 Advisory Guidance), the Enforcement Bureau explained that the transparency rule prevents a broadband Internet access provider from making assertions about its service that contain errors, are inconsistent with the provider s disclosure statement, or are misleading or deceptive. 387 Accurate disclosures ensure that consumers as well as the Commission and the public as a whole are informed about a broadband Internet access provider s network management practices, performance, and commercial terms. 388 As the 2014 Advisory Guidance recognized, the transparency rule can achieve its purpose of sufficiently informing consumers only if advertisements and other public statements that broadband Internet access providers make about their services are accurate and consistent with any official disclosures that providers post on their websites or make available in stores or over the phone. 389 Thus, a provider making an inaccurate assertion about its service performance in an advertisement, where the description is most likely to be seen by consumers, could not defend itself against a Transparency Rule violation by pointing to an accurate official disclosure in some other public place. 390 Allowing such defenses would undermine the core purpose of the transparency rule Today, we build off of this baseline: the transparency rule requirements established in 2010, and interpreted by the 2011 and 2014 Advisory Guidance. We also take this opportunity to make two clarifications to the existing rule. First, all of the pieces of information described in paragraphs 56 and 98 of the Open Internet Order have been required as part of the current transparency rule, and we will continue to require the information as part of our enhanced rule. The only exception is the requirement to disclose typical frequency of congestion, which we no longer require since it is superseded by more precise disclosures already required by the rule, such as actual performance. 391 Second, the requirement that all disclosures made by a broadband provider be accurate includes the need to maintain the accuracy of these disclosures. Thus, whenever there is a material change in a provider s disclosure of commercial terms, network practices, or performance characteristics, the provider has a duty to update the disclosure in a manner that is timely and prominently disclosed in plain language accessible to current and prospective end users and edge providers, the Commission, and third parties who wish to monitor network management practices for potential violations of open Internet principles. 392 For these purposes, 385 Id.; see also 2010 Open Internet Order, 25 FCC Rcd at 17939, para Enforcement Advisory Guidance, 26 FCC Rcd at FCC Enforcement Advisory, Open Internet Transparency Rule: Broadband Providers Must Disclose Accurate Information to Protect Consumers, Public Notice, 29 FCC Rcd 8606, 8607 (2014) (2014 Advisory Guidance). 388 Id. 389 Id. 390 Id Open Internet Order, 25 FCC Rcd at , para Id. We decline, however, to adopt a specific timeframe concerning the updating of disclosures following a material change (e.g., 24 hours). See 2014 Open Internet NPRM, 29 FCC Rcd at 5593, para. 88 ( In what timeframe should the Commission require providers to report... changes in their traffic management policies to the Commission? ). 71

72 a material change is any change that a reasonable consumer or edge provider would consider important to their decisions on their choice of provider, service, or application. b. Enhancing the Transparency Rule 162. We adopt the tentative conclusion in the 2014 Open Internet NPRM to enhance the existing transparency rule in certain respects. We conclude that enhancing the existing transparency rule as described below will better enable end-user consumers to make informed choices about broadband services by providing them with timely information tailored more specifically to their needs, and will similarly provide edge providers with the information necessary to develop new content, applications, services, and devices that promote the virtuous cycle of investment and innovation. 393 (i) Enhancements to Content of Required Disclosures 163. As noted above, the existing transparency rule requires specific disclosures with respect to network practices, performance characteristics, and commercial terms. 394 As we noted in the 2014 Open Internet NPRM, the Commission has continued to receive numerous complaints from consumers suggesting that broadband providers are not providing information that end users and edge providers need to receive. 395 We noted that consumers continue to express concern that the speed of their service falls short of advertised speeds, that billed amounts are greater than advertised rates, and that consumers are unable to determine the source of slow or congested service. 396 In addition, we noted that end users are often surprised that broadband providers slow or terminate service based on excessive use or based on other practices, and that consumers report confusion regarding data thresholds or caps. 397 Further, the need for enhanced transparency is bolstered by the needs of certain user groups who rely on broadband as their primary avenue for communications, such as people with disabilities. 398 These enhancements will also serve edge providers. The record supports our conclusions that more specific and detailed disclosures are necessary to ensure that edge providers can develop, market, and maintain Internet offerings. 399 Such disclosures will also help the wider Internet community monitor provider practices to ensure compliance with our Open Internet rules and providers own policies Commercial Terms. The existing transparency rule defines the required disclosure of commercial terms to include pricing, privacy policies, and redress options. While we do not take additional action concerning the requirement to disclose privacy policies and redress options, the record demonstrates need for specific required disclosures about price and related terms. In particular, we 393 See, e.g., Organization for Economic Co-operation and Development, Enhancing Competition in Telecommunications: Protecting and Empowering Consumers, Directorate for Science, Technology and Industry, Committee for Information, Computer and Communications Policy at 4 (2008), (stating that informed consumers are necessary to stimulate firms to innovate, improve quality and compete in terms of price. In making well-informed choices between suppliers, consumers not only benefit from competition, but they initiate and sustain it. ); Comcast Comments at (noting that some of the transparency enhancements suggested in the NPRM could support the virtuous circle ); EFF Comments at 26 (discussing the importance of information from broadband providers in order to develop new applications and protocols); iclick2media Comments at 19 (noting that greater communication with end users would allow end users to become active in the virtuous circle); Koning Comments at 18 (noting that without transparency, forms of Internet encryption widely used today would not be possible ) Open Internet Order, 25 FCC Rcd at , para Open Internet NPRM, 29 FCC Rcd at , para Id. 397 Id. 398 See, e.g., TDI Comments at See, e.g., EFF Comments at 26; Microsoft Comments at 31; Telecommunications for the Deaf and Hard of Hearing Comments at 3; Vonage Comments at

73 specify the disclosures of commercial terms for prices, other fees, and data caps and allowances as follows: Price the full monthly service charge. Any promotional rates should be clearly noted as such, specify the duration of the promotional period, and note the full monthly service charge the consumer will incur after the expiration of the promotional period. 400 Other Fees all additional one time and/or recurring fees and/or surcharges the consumer may incur either to initiate, maintain, or discontinue service, including the name, definition, and cost of each additional fee. 401 These may include modem rental fees, installation fees, service charges, and early termination fees, among others. Data Caps and Allowances any data caps or allowances that are a part of the plan the consumer is purchasing, as well as the consequences of exceeding the cap or allowance (e.g., additional charges, loss of service for the remainder of the billing cycle). To be clear, these disclosures may have been required in certain circumstances under the existing transparency rule in order to provide information sufficient for consumers to make informed choices. Here, we now require that this information always be disclosed. In addition, per the current rule, disclosures of commercial terms shall also include the provider s privacy policies ( [f]or example, whether network management practices entail inspection of network traffic, and whether traffic information is stored, provided to third parties, or used by the carrier for non-network management purposes ) and redress options ( practices for resolving end-user and edge provider complaints and questions ) Performance Characteristics. The existing transparency rule requires broadband providers to disclose accurate information regarding network performance for each broadband service they offer. 403 This category includes a service description ( [a] general description of the service, including the service technology, expected and actual access speed and latency, and the suitability of the service for real-time applications ) and the impact of specialized services ( [i]f applicable, what specialized services, if any, are offered to end users, and whether and how any specialized services may affect the last-mile capacity available for, and the performance, or broadband Internet access service ) With respect to network performance, we adopt the following enhancements: The existing transparency rule requires disclosure of actual network performance. 405 In adopting that requirement, the Commission mentioned speed and latency as two key 400 See Charter Comments at 23 (noting that Charter s website explains when promotional rates will revert to standard rates ). 401 See IL and NY Comments at ( [T]he transaction costs [to the consumer] of changing service in order to avoid pay-for-priority or individualized agreements can be substantial. They include early-termination fees, installation fees, finding an alternative broadband Internet service provider and comparing speeds.... ). The Commission agrees that the magnitude of these fees bears on consumer decision-making when choosing or switching providers. As a result, the provision of explicit information regarding these fees by providers both promotes competition and assists in consumer decision making Open Internet Order, 25 FCC Rcd at 17939, para Id.; 2011 Advisory Guidance, 26 FCC Rcd Open Internet Order, 25 FCC Rcd at 17939, para See Id. at 17939, para. 56; 2011 Advisory Guidance, 26 FCC Rcd at

74 measures. 406 Today we include packet loss as a necessary part of the network performance disclosure. 407 We expect that disclosures to consumers of actual network performance data should be reasonably related to the performance the consumer would likely experience in the geographic area in which the consumer is purchasing service. 408 We also expect that network performance will be measured in terms of average performance over a reasonable period of time and during times of peak usage. 409 We clarify that, for mobile broadband providers, the obligation in the existing transparency rule to disclose network performance information for each broadband service refers to separate disclosures for services with each technology (e.g., 3G and 4G). Furthermore, with the exception of small providers, mobile broadband providers today can be expected to have access to reliable actual data on performance of their networks representative of the geographic area in which the consumer is purchasing service through their own or third-party testing that would be the source of the disclosure. 410 Commission staff also continue to refine the mobile MBA program, which could at the appropriate time be declared a safe harbor for mobile broadband providers Open Internet Order, 25 FCC Rcd at 17939, para See, e.g., AARP Comments at 49 (stating that information regarding packet loss could be useful to consumers if accessible); EFF Comments at 29 (calling for inclusion of packet loss in disclosures); Online Publishers Association Comments at 8-9 (supporting the inclusion of packet loss in disclosures); TechAmerica Comments at 5-6 (supporting the inclusion of packet loss); see also BITAG Congestion Report at 12 (discussing delay intolerant applications). 408 See, e.g., Cogent Remand PN Comments at 13 ( Without more localized data, consumers will not have meaningful information on which to base choices concerning local broadband service, and broadband providers will not be incentivized to offer higher quality serves in all areas. ); See Letter from Dr. Jeremy Gillula, Electronic Frontier Foundation, to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 1 (filed Oct. 30, 2014) ( We also suggested that if a national ISP has significantly different performance in different metropolitan or other geographical areas, then the ISP should be required to report its metrics separately for each of those areas. ); id. at 3 ( [I]t would be useful if mobile broadband ISPs provided additional disclosures (particularly metrics like throughput and packet loss) broken down by geographical area.... ). 409 We recognize that parties have expressed concern about providing disclosures about network performance on a real-time basis. See Letter from Scott K. Bergmann, Vice Pres. Reg. Affairs, CTIA to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 2 (filed Jan. 15, 2015). The enhancements to the transparency rule we adopt today do not include such a requirement. See, e.g., WGAW Comments at 18 (calling for disclosure of actual speeds at peak times); see also FCC s Office of Engineering and Technology and Consumer & Governmental Affairs Bureau, 2014 Measuring Broadband America Fixed Broadband Report: A Report on Consumer Fixed Broadband Performance in the US at 5 (2014), Measuring-Broadband-America-Report.pdf (stating that download and upload speeds are measured by average throughput over a 5 second time window, and defining the peak usage period for fixed broadband as between 7:00 p.m. and 11:00 p.m. local time). Given that the performance of mobile broadband networks is subject to a greater array of factors than fixed networks, we note that disclosure of a range of speeds may be more appropriate for mobile broadband consumers. 410 Per the 2011 Advisory Guidance, those mobile broadband providers that lack reasonable access to reliable information on their network performance metrics may disclose a Typical Speed Range (TSR) to meet the requirement to disclose actual performance. See 2011 Advisory Guidance, 26 FCC Rcd at In any event, we expect that mobile broadband providers disclosure of actual performance data will be based on accepted industry practices and principles of statistical validity. 411 Participation in the Measuring Broadband America (MBA) program continues to be a safe harbor for fixed broadband providers in meeting the requirement to disclose actual network performance. The 2011 Advisory (continued.) 74

75 We decline to otherwise codify specific methodologies for measuring the actual performance required by the existing transparency rule. We find that, as in 2010, there is benefit in permitting measurement methodologies to evolve and improve over time, with further guidance from Bureaus and Offices like in 2011 as to acceptable methodologies. 412 We delegate authority to our Chief Technologist to lead this effort In addition, the existing rule concerning performance characteristics requires disclosure of the impact of specialized services, including what specialized services, if any, are offered to end users, and whether and how any specialized services may affect the last-mile capacity available for, and the performance of, broadband Internet access service. 413 As discussed below, today we more properly refer to these services as non-bias data services. Given that the Commission will closely scrutinize offerings of non-bias data services and their impact on competition, we clarify that in addition to the requirements of the existing rule concerning what was formerly referred to as specialized services, disclosure of the impact of non-bias data services includes a description of whether the service relies on particular network practices and whether similar functionality is available to applications and services offered over broadband Internet access service The 2014 Open Internet NPRM tentatively concluded that we should require that broadband providers disclose meaningful information regarding the source, location, timing, speed, packet loss, and duration of network congestion. 415 As discussed above, we continue to require disclosure of actual network speed and latency (as in 2010), and also require disclosure of packet loss. We decline at this time to require disclosure of the source, location, timing, or duration of network congestion, noting that congestion may originate beyond the broadband provider s network and the limitations of a broadband provider s knowledge of some of these performance characteristics. 416 We also asked whether (Continued from previous page) Guidance further stated that fixed providers that choose not to participate in MBA may measure and disclose performance of their broadband offerings using the MBA s methodology, internal testing, consumer speed data, or other data, including reliable, relevant data from third-party sources. See 2011 Advisory Guidance, 26 FCC Rcd at Various software-based broadband performance tests are available as potential tools for end users and companies to estimate actual broadband performance. See, e.g., FCC, Speed Test App, (last visited Feb. 24, 2015); Ookla, Speedtest.net (last visited Feb. 24, 2015); MLab, Internet Measurement Tools, (last visited Feb. 24, 2015); Assia, CloudCheck, (last visited Feb. 24, 2015). See also Letter from Gerard J. Waldron, counsel to Adaptive Spectrum and Signal Alignment, Inc. (ASSIA), to Marlene H. Dortch, Secretary, FCC, GN Docket No (filed Jan. 28, 2015) (discussing a particular application, CloudCheck, which ASSIA reports measures and monitors broadband speeds and throughout, and... can report to consumers and other interested parties information about the performance of consumers internet connectivity ). As noted above, we anticipate that the measurement methodology used for the MBA project will continue to be refined, which in turn will enhance the effectiveness of network performance disclosures generally. See, e.g., ACA Comments at 36 (stating that the MBA program is achieving its aims); CenturyLink Comments at (noting the significant transparency through MBA participation); Frontier Comments at 7 (suggesting making greater use of the MBA program). 412 We expect that acceptable methodologies will be grounded in commonly accepted principles of scientific research, good engineering practices, and transparency. See FCC s Office of Engineering and Technology and Consumer & Governmental Affairs Bureau, Measuring Broadband America Policy on Openness and Transparency, (last visited Feb. 21, 2015) Open Internet Order, 25 FCC Rcd at 17939, para See infra Section III.D.3.; see also BITAG Congestion Report at 43 (discussing transparency). 415 See 2014 Open Internet NPRM, 29 FCC Rcd at 5591, para Short-term congestion occurs whenever instantaneous demand exceeds capacity. See BITAG Congestion Report at 4-5. Since demand often consists of the aggregation of a large number of users traffic, it is technologically difficult to determine the sources of each component of the aggregate traffic. See, e.g., ACA Comments at 40; AT&T Comments at 88; Charter Comments at 27 (noting that ISPs can monitor only a portion of the transmission (continued.) 75

76 the Commission should expand its transparency efforts to include measurement of other aspects of service. 417 We decline at this time to require disclosure of packet corruption or jitter, noting that commenters expressed concerns regarding the difficulty of defining metrics for such performance characteristics Network Practices. The existing transparency rule requires disclosure of network practices, including specific disclosures related to congestion management, application-specific behavior, device attachment rules, and security. 419 Today, in recognition of significant consumer concerns presented in the record, we further clarify that disclosure of network practices shall include practices that are applied to traffic associated with a particular user or user group, including any application-agnostic degradation of service to a particular end user. 420 We also clarify that disclosures of user-based or application-based practices should include the purpose of the practice, which users or data plans may be (Continued from previous page) path); Letter from Steven F. Morris, Vice Pres. and Gen. Counsel, NCTA, to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 2 (filed Jan ) ( As the Commission has acknowledged, the performance experienced by a consumer is affected by many factors beyond the control of an ISP. ); Cox Comments at 20-21; WISPA Comments at 16 ( In addition, the source of congestion at a given time may not be clear to the broadband provider, especially if the congestion results from events occurring outside the local broadband network. As a result, broadband providers will simply default to general language listing all of the possible sources of congestion, which solves no purpose other than to make disclosure requirements confusing and meaningless. ). 417 See 2014 Open Internet NPRM, 29 FCC Rcd at 5588, para See, e.g., AT&T Comments at 89 ( [R]equiring more technical disclosures would not yield meaningful benefits to edge providers or device manufacturers, because there is no single industry-accepted meaning or method of measurement for broadband metrics like corruption and jitter. ). Furthermore, corrupted packets may be included in the packet loss performance characteristic Open Internet Order, 25 FCC Rcd at , para. 56 (elaborating upon each of these subcategories as follows: (1) congestion management ( If applicable, descriptions of congestion management practices; types of traffic subject to practices; purposes served by practices; practices effects on end users experience; criteria used in practices, such as indicators of congestion that trigger a practice, and the typical frequency of congestion; usage limits and the consequences of exceeding them; and references to engineering standards, where appropriate ); (2) application-specific behavior ( If applicable, whether and why the provider blocks or rate-controls specific protocols or protocol ports, modifies protocol fields in ways not prescribed by the protocol standard, or otherwise inhibits or favors certain applications or classes of applications ); (3) device attachment rules ( If applicable, any restrictions on the types of devices and any approval procedures for devices to connect to the network ); and (4) security ( If applicable, practices used to ensure end-user security or security of the network, including types of triggering conditions that cause a mechanism to be invoked (but excluding information that could reasonably be used to circumvent network security) ); see id. at 17959, para. 98 (specifying certain application-approval and deviceattachment disclosures by mobile broadband providers, explaining that the transparency rule requires them: to disclose their third-party device and application certification procedures, if any; to clearly explain their criteria for any restrictions on use of their network; and to expeditiously inform device and application providers of any decisions to deny access to the network or of a failure to approve their particular devices or applications ). Additionally, mobile broadband providers should follow the guidance the Commission provided to licensees of the upper 700 MHz C Block spectrum regarding compliance with their disclosure obligations, particularly regarding disclosure to third-party application developers and device manufacturers of criteria and approval procedures (to the extent applicable). For example, these disclosures include, to the extent applicable, establishing a transparent and efficient approval process for third parties, as set forth in Rule 27.16(d). Id. As discussed above, this information remains part of the transparency rule, with the exception of the requirement to disclose the typical frequency of congestion. 420 For example, a broadband Internet access service provider may define user groups based on the service plan to which users are subscribed, the volume of data that users send or receive over a specified time period of time or under specific network conditions, or the location of users. See infra Sections III.C.1.b; III.D.4. See also BITAG Congestion Report at 18 (discussing user-based congestion management); Microsoft Comments at 31 (discussing the need to disclose congestion thresholds that trigger traffic shaping and the consequences of traffic shaping). 76

77 affected, the triggers that activate the use of the practice, the types of traffic that are subject to the practice, and the practice s likely effects on end users experiences. 421 While some of these disclosures may have been required in certain circumstances under the existing transparency rule, here we clarify that this information should always be disclosed. These disclosures with respect to network practices are necessary: for the public and the Commission to know about the existence of network practices that may be evaluated under the rules, for users to understand when and how practices may affect them, and for edge providers to develop Internet offerings The 2014 Open Internet NPRM asked whether we should require disclosures that permit end users to identify application-specific usage or to distinguish which user or device contributed to which part of the total data usage. 422 We decline at this time to require such disclosures, noting that collection of application-specific usage by a broadband provider may require use of deep packet inspection practices that may pose privacy concerns for consumers. 423 (ii) Enhancements to the Means of Disclosure 171. The existing transparency rule requires, at a minimum, the prominent display of disclosures on a publicly available website and disclosure of relevant information at the point of sale. 424 We enhance the rule to require a mechanism for directly notifying end users if their individual use of a network will trigger a network practice, based on their demand prior to a period of congestion, that is likely to have a significant impact on the end user s use of the service. The purpose of such notification is to provide the affected end users with sufficient information and time to consider adjusting their usage to avoid application of the practice. (iii) Small Businesses 172. The record reflects the concerns of some commenters that enhanced transparency requirements will be particularly burdensome for smaller providers. 425 ACA, for example, suggests that 421 See infra Section III.D.4. See also BITAG Congestion Report at 43 (discussing what should be required in disclosures of congestion management policies); Broadband Internet Technical Advisory Group, Port Blocking at (2013) (discussing recommendations for disclosure of ISP port blocking policies); Microsoft Comments at 31 (recommending disclosure of types of edge services or protocols (if any) the broadband access provider filters, prioritizes, or otherwise treats in a non-neutral manner, relative to other types of traffic ); EFF Comments at 29 (requesting clear warnings about any fast lanes, premium services, blocking or filtering that the user will not have a simple and practical way to avoid ); Kentucky Public Library Association Comments at 1 ( Consumers should be aware of the ISP s guidelines on what kind of content qualifies as spam and what level of congestion would necessitate limiting certain customer s bandwidth. ); Online Publishers Association Comments at 9 (noting importance of information about any network management practices that may impede [consumers ] ability to access to content or services); Roku Comments at iii (noting that any practices or policies that exempt traffic from data caps should be specifically disclosed); TechAmerica Comments at 5 (supporting the disclosure of any blocking); Vonage Comments at (requesting disclosure of all network management practice that degrade service capacity); WGAW Comments at 18 (asking for details on congestion management policies). 422 See 2014 Open Internet NPRM, 29 FCC Rcd at 5588, para See, e.g., NCTA Comments at 50 ( Such a requirement likely would necessitate significant use of deep packet inspection in an attempt to determine the user or device responsible for originating or receiving particular Internet traffic. ); EFF Comments at 32 (expressing privacy concerns about disclosure of application-specific information) Open Internet Order, 25 FCC Rcd at , para. 57. Broadband providers must actually disclose information required for consumers to make an informed choice regarding the purchase or use of broadband services at the point of sale. It is not sufficient for broadband providers simply to provide a link to their disclosures. See supra Section III.C.3.a. 425 See, e.g., ACA Comments at 32-39; Competitive Carrier Association (CCA) Comments at 8-9 ( Expanding the current disclosure requirements would also be particularly burdensome on smaller carriers); WISPA Comments at 15-16; WTA Comments at 8 ( WTA is very concerned about the increased costs and uncertain benefits of the (continued.) 77

78 smaller providers be exempted from the provision of such disclosures. 426 ACA states that its member companies are complying with the current transparency requirements, which strike the right balance between edge provider and consumer needs for pertinent information and the need to provide ISPs with some flexibility in how they disclose pertinent information. 427 We believe that the transparency enhancements adopted today are modest in nature. For example, we have declined to require certain disclosures proposed in the 2014 Open Internet NPRM such as the source of congestion, packet corruption, and jitter in recognition of commenter concerns with the benefits and difficulty of making these particular disclosures. We also do not require real-time disclosures. These proposed disclosures appear to form the bulk of ACA s concerns. 428 Nevertheless, we take seriously the concerns that ACA raises and those of smaller broadband providers generally Out of an abundance of caution, we grant a temporary exemption for these providers, with the potential for that exemption to become permanent. It is unclear, however, how best to delineate the boundaries of this exception. Clearly, it should include those providers likely to be most disproportionately affected by new disclosure requirements. ACA acknowledge[s] that Congress and the Commission have defined small in various ways. 429 One metric to which ACA points is the approach that the Commission used in its 2013 Rural Call Completion Order, which excepted providers with 100,000 or fewer subscriber lines, aggregated across all affiliates, from certain recordkeeping, retention, and reporting rules. 430 We adopt this definition for purposes of the temporary exemption that we adopt today. Accordingly, we hereby adopt a temporary exemption from the enhancements to the transparency rule for those providers of broadband Internet access service (whether fixed or mobile) with 100,000 or fewer broadband subscribers as per their most recent Form 477, aggregated over all the providers affiliates. 431 (Continued from previous page) proposed enhanced transparency requirements for smaller carriers and their customers. ); Letter from Erin P. Fitzgerald, Assistant Regulatory Counsel, Rural Wireless Association, Inc., to Marlene H. Dortch, Secretary, FCC, GN Docket Nos at 1 (filed Nov. 14, 2014) (RWA Nov. 14, 2014 Ex Parte Letter) ( While RWA members have developed procedures to comply with the Commission s 2010 transparency and disclosure rules,[footnote omitted] engaging in a similar endeavor to comply with new and/or more stringent rules would be costly and further strain rural carriers limited resources. ); Letter from Stephen E. Coran, Counsel to the Wireless Internet Service Providers Association, to Marlene H. Dortch, Secretary, FCC, GN Docket Nos at 8 (filed Feb. 3, 2015) ( To avoid the significant effects that would result from the Commission s proposed rules, the Commission should exempt small businesses from any new transparency and reporting obligations. ). 426 See ACA Comments at ( any enhanced disclosure rule regarding network congestion... should exclude small providers ). 427 Letter from Barbara Esbin, Counsel for ACA, to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , , at 6 (filed Feb. 2, 2015) (ACA Feb. 2, 2015 Ex Parte Letter). 428 Id. at 5-6 ( ACA also discussed the lack of record support for the imposition of any enhanced transparency requirements for small ISPs, particularly proposals to maintain a separate set of Open Internet disclosures tailored to the needs of edge providers and to disclose, on a real-time basis, information about network congestion and the lack of demonstrable benefits that would accrue from such reporting ). See also id. at 6 (reporting on an ex parte meeting in which a representative of an ACA member confirmed that realtime network congestion disclosures would be highly burdensome for a small ISP ). 429 Id. at See Rural Call Completion, WC Docket No , Report and Order and Further Notice of Proposed Rulemaking, 28 FCC Rcd (2013) (Rural Call Completion Order). We also note that one of the entities requesting relief from enhanced transparency rules RWA is comprised of member companies serving fewer than 100,000 mobile subscribers. RWA Nov. 14, 2014 Ex Parte Letter at Cf. Rural Call Completion Order, 28 FCC Rcd at 16164, para

79 174. Yet we believe that both the appropriateness of the exemption and the threshold require further deliberation. Accordingly, the exemption we adopt is only temporary. We delegate to the Consumer & Governmental Affairs Bureau (CGB) the authority to determine whether to maintain the exemption and, if so, the appropriate threshold for it. We direct CGB to seek comment on the question and to adopt an Order announcing whether it is maintaining an exemption and at what level by no later than December 15, Until such time, notwithstanding any approval received by the Office of Management & Budget for the enhancements adopted today, such enhancements will not apply to providers of broadband Internet access service with 100,000 or fewer subscribers To be clear, all providers of broadband Internet access service, including small providers, remain subject to the existing transparency rule adopted in The temporary exemption adopted today, and any permanent exemption adopted by CGB, applies only to the enhanced disclosures described above. As ACA states in its request for an exemption for small providers, [i]rrespective of which definition of small that is chosen by the Commission, exempt ISPs would still be required to comply with the transparency requirements contained in Section 8.3 of the Commission s rules today. 432 (iv) Safe Harbor for Form of Disclosure to Consumers 176. The existing transparency rule requires disclosures sufficient both to enable consumers to make informed choices regarding use of [broadband] services and content, application, service, and device providers to develop, market, and maintain Internet offerings. 433 As in 2010, a central purpose of the transparency rule remains to provide information useful to both constituencies. As we noted in the 2014 Open Internet NPRM, we are concerned that disclosures are not consistently provided in a manner that adequately satisfies the divergent informational needs of all affected parties. For example, disclosures at times are ill-defined; do not consistently measure service offerings, making comparisons difficult; or are not easily found on provider websites. 434 In the 2014 Open Internet NPRM, we therefore proposed requiring separate disclosure statements to meet both the basic informational needs of consumers and the more technical needs of edge providers The record reflects concerns, however, as to a requirement to offer tailored disclosures. For example, ACA states that disclosures tailored to edge providers would require small ISPs, who manage their own networks and may only have a handful of network operators, engineers, and head end staff to make onerous expenditures of both personnel hours and financial resources. 436 Bright House question[s] the feasibility of creating disclosures tailored to the varied and potentially unique needs of the hundreds of such providers, particularly with no reciprocal obligation. 437 Similarly, Tech Freedom and the International Center for Law and Economics assert that requiring ISPs to tailor their disclosures to the various parties the ISPs deal with (i.e., consumers, edge providers, the Internet community, and the FCC) greatly increases the burden of complying with these disclosures, especially as such disclosures must be periodically updated to reflect changes to ISPs network management practices. 438 In light of these concerns, we decline to require separate disclosures at this time. 432 RWA Nov. 14, 2014 Ex Parte Letter at Open Internet Order, 25 FCC Rcd at 17937, para See, e.g., Mayor de Blasio et al. Comments at 1 ( Currently, the lack of clear, accurate information results in confusion with respect to key service features like download and upload speeds, pricing and usage restrictions. ) Open Internet NPRM, 29 FCC Rcd at 5586, para Letter from Barbara S. Esbin, Counsel for American Cable Association to Marlene H. Dortch, Secretary, FCC, GN Docket Nos , , at 4 (filed Jan. 28, 2015). 437 Bright House Comments at Tech Freedom Comments at

80 178. In declining to mandate separate disclosures, however, we do not intend to diminish the existing requirement for disclosure of information sufficient for both end users and edge providers. The Commission has not established that a single disclosure would always satisfy the rule; rather, it merely stated broadband providers may be able to satisfy the transparency rule through a single disclosure. We are especially concerned that in some cases a single disclosure statement may be too detailed and technical to meet the needs of consumers, rather than a separate consumer-focused disclosure. As noted in the 2014 Open Internet NPRM, both academic research and the Commission s experience with consumer issues have demonstrated that the manner in which providers display information to consumers can have as much impact on consumer decisions as the information itself. 439 A stand-alone format has proven effective in conveying useful information in other contexts. 440 We also note that the OIAC and OTI have proposed the use of a label to disclose the most important information to users of broadband service. 441 In addition, the United Kingdom s largest Internet service providers agreed to produce a comparable table of traffic management information called a Key Facts Indicator Therefore, we are establishing a voluntary safe harbor for the format and nature of the required disclosure to consumers. To take advantage of the safe harbor, a broadband provider must provide a consumer-focused, standalone disclosure. We decline, however, to mandate the exact format for such disclosures at this time. 443 Rather, we seek the advice of our Consumer Advisory Committee, which is composed of both industry and consumer interests, including those representing people with disabilities. 444 We find that the Committee s experience with consumer disclosure issues 445 makes it an ideal body to recommend a disclosure format that should be clear and easy to read similar to a nutrition label to allow consumers to easily compare the services of different providers. We believe the CAC is uniquely able to recommend a disclosure format that both anticipates and addresses provider compliance burdens while ensuring the utility of the disclosures for consumers We direct the CAC to formulate and submit to the Commission a proposed disclosure format, based on input from a broad range of stakeholders, within six months of the time that its new membership is reconstituted, but, in any event, no later than October 31, The disclosure format must be accessible to persons with disabilities. We expect that the CAC will consider whether to propose the same or different formats for fixed and mobile broadband providers. In addition, we expect that the 439 See 2014 Open Internet NPRM, 29 FCC Rcd at , para See id. at 5588 n See Open Internet Advisory Committee, Open Internet Label Study (Aug. 20, 2013), at (OIAC Label Study); see also New America Foundation Broadband Truth-in-Labeling proposal: See Ofcom, Improving traffic management transparency: Ofcom sets out steps for ISPs to take (Nov. 2011), We note that although we have sought comment on what format would be most effective, the record is lacking on specific details as to how such a disclosure should be formatted. 444 The Committee s purpose is to make recommendations to the Commission regarding consumer issues within Commission s jurisdiction and to facilitate the participation of consumers (including people with disabilities and underserved populations, such as Native Americans and persons living in rural areas) in proceedings before the Commission. 445 For example, the Committee has studied the value of standardized disclosures and their contents. See, e.g., FCC Consumer Advisory Committee, Recommendations Regarding Pre-Sale Consumer Disclosures (Aug. 4, 2010), at See, e.g., NCTA Comments at 51 ( If the Commission decides to pursue standardized disclosures, NCTA would welcome the opportunity to participate in the development of a voluntary program. ). 80

81 CAC will consider whether and how a standard format for mobile broadband providers will allow providers to continue to differentiate their services competitively, as well as how mobile broadband providers can effectively disclose commercial terms to consumers regarding myriad plans in a manner that is not administratively burdensome. The Commission delegates authority to the Wireline Competition Bureau, Wireless Telecommunications Bureau, and Consumer & Governmental Affairs Bureau to issue a Public Notice announcing whether the proposed format or formats meet its expectations for the safe harbor for making consumer-facing disclosures. If the format or formats do not meet such expectations, the Bureaus may ask the CAC to consider changes and submit a revised proposal for the Bureaus review within 90 days of the Bureaus request Broadband providers that voluntarily adopt this format will be presumed to be in compliance with the requirement to make transparency disclosures in a format that meets the needs of consumers. Providers that choose instead to maintain their own format for example, a unitary disclosure intended both for consumers and edge providers will bear the burden, if challenged, of explaining how a single disclosure statement meets the needs of both consumers and edge providers. To be clear, use of the consumer disclosure format is a safe harbor with respect to the format of the required disclosure to consumers. A broadband provider meeting the safe harbor could still be found to be in violation of the rule, for example, if the content of that disclosure (e.g., prices) is misleading or inaccurate, or the provider makes misleading or inaccurate statements in another context, such as advertisements or other statements to consumers. Moreover, broadband providers using the safe harbor should continue to provide the more detailed disclosure statement for the benefit of edge providers. c. Enforcement and Relationship to the Existing Transparency Rule 182. Despite these enhancements to the existing transparency rule, we clarify that we are being specific in order to provide additional guidance. The transparency rule has always required broadband providers to disclose information sufficient for consumers to make informed choices 447 and that test could, in particular circumstances, include the enhancements that we expressly adopt today. We also reiterate that under both the existing transparency rule and the enhancements adopted in this Order, all disclosures that broadband providers make about their network practices, performance, and commercial terms of broadband services must be accurate and not misleading In the 2014 Open Internet NPRM we also requested comment on how the Commission could best enforce the transparency rule. 449 In particular, we noted that a key objective of the transparency rule is to enable the Commission to collect information necessary to access, report, and enforce the open Internet rules. 450 For example, we sought comment on whether to require broadband providers to certify that they are in compliance with the required disclosures and/or submit reports containing descriptions of current disclosure practices, particularly if the existing flexible approach is amended to require more specific disclosures. 451 Some commenters caution against measures that are unnecessary, susceptible to abuse, or burdensome. 452 Others express support for stronger or more 447 See 47 C.F.R Even where a particular category of information discussed above was not specified in the 2010 Open Internet Order that does not mean that disclosure of that information has not consistently been required under the transparency rule. If such information is necessary for a consumer to make an informed choice regarding the purchase or use of broadband service, disclosure of that information is a fundamental requirement of the transparency rule. 448 See 2014 Advisory Guidance, 29 FCC Rcd at See 2014 Open Internet NPRM, 29 FCC Rcd at , para Id. 451 Id. 452 See, e.g., ACA Comments at v ( The Commission should, rather than adopt enhancements, continue to rely upon its complaints and enforcement procedures to address any material concerns about individual providers disclosures (continued.) 81

82 efficient enforcement mechanisms. 453 At this time we decline to require certification by broadband providers. Should evidence be provided, however, that certification is necessary, we will revisit this issue at a later date We also remind providers that if their disclosure statements fail to meet the requirements established in 2010 and enhanced today, they may be subject to investigation and forfeiture. The Enforcement Bureau will closely scrutinize failure by providers to meet their obligations in fulfilling the transparency rule. d. Role of Further Advisory Guidance 185. The 2011 and 2014 Advisory Guidance documents illustrate the role of further guidance from Commission staff in interpreting and applying the general requirements of the transparency rule. We anticipate that as technology, the marketplace, and the needs of consumers, edge providers, and other stakeholders evolve, further such guidance may be appropriate concerning the transparency rule, including with respect to the enhancements adopted today. The most immediate example concerns ongoing improvements and evolutions in the methodologies for measuring broadband providers actual performance, as discussed in further detail above. We also point out that broadband providers are able to seek advisory opinions from the Enforcement Bureau concerning any of the open Internet regulations, including the transparency rule. 454 D. Scope of the Rules 186. The open Internet rules we adopt today apply to fixed and mobile broadband Internet access service. We make clear, however, that while the definition of broadband Internet access service encompasses arrangements for the exchange of Internet traffic, the open Internet rules we adopt today do not apply to that portion of the broadband Internet access service. 455 as: 1. Broadband Internet Access Service 187. As discussed below, we continue to define broadband Internet access service (BIAS) A mass-market retail service by wire or radio that provides the capability to transmit data to and receive data from all or substantially all Internet endpoints, including any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service. This term also encompasses any service that the Commission finds to be providing a functional equivalent of the service described in the previous sentence, or that is used to evade the protections set forth in this Part Broadband Internet access service continues to include services provided over any technology platform, including but not limited to wire, terrestrial wireless (including fixed and mobile (Continued from previous page) that may arise. ); Charter Comments at (arguing that the proposed enhanced enforcement mechanisms are unnecessary and susceptible to abuse). 453 See, e.g., EFF Comments at 26-27; Microsoft Comments at See infra Section III.E.2.a(i). 455 See infra Section III.D C.F.R. 8.11(a); 2010 Open Internet Order, 25 FCC Rcd at 17932, para. 44; id. at 17935, para. 51 (finding that the market and regulatory landscape for dial-up Internet access service differed from broadband Internet access service); 2014 Open Internet NPRM, 29 FCC Rcd at 5581, para. 54. The Verizon decision upheld the Commission s regulation of broadband Internet access service pursuant to section 706 and the definition of broadband Internet access service has remained part of the Commission s regulations since adopted in

83 wireless services using licensed or unlicensed spectrum), and satellite. 457 Broadband Internet access service encompasses all providers of broadband Internet access service, as we delineate them here, regardless of whether they lease or own the facilities used to provide the service. 458 Fixed broadband Internet access service refers to a broadband Internet access service that serves end users primarily at fixed endpoints using stationary equipment, such as the modem that connects an end user s home router, computer, or other Internet access device to the network. 459 The term encompasses the delivery of fixed broadband over any medium, including various forms of wired broadband services (e.g., cable, DSL, fiber), fixed wireless broadband services (including fixed services using unlicensed spectrum), and fixed satellite broadband services. Mobile broadband Internet access service refers to a broadband Internet access service that serves end users primarily using mobile stations. 460 It also includes services that use smartphones or mobile-network-enabled tablets as the primary endpoints for connection to the Internet, 461 as well as mobile satellite broadband services We continue to define mass market as a service marketed and sold on a standardized basis to residential customers, small businesses, and other end-user customers such as schools and libraries. 463 To be clear, mass market includes broadband Internet access services purchased with support of the E-rate and Rural Healthcare programs, as well as any broadband Internet access service offered using networks supported by the Connect America Fund (CAF). 464 To the extent that institutions Open Internet Order, 25 FCC Rcd at 17932, para The Commission has consistently determined that resellers of telecommunications services are telecommunications carriers, even if they do not own any facilities. See, e.g., Regulation of Prepaid Calling Card Services, WC Docket No , Declaratory Ruling and Report and Order, 21 FCC Rcd 7290, , 7312, paras. 10, 65 (2006), vacated in part on other grounds sub nom. Qwest Servs. Corp. v. FCC, 509 F.3d 531 (D.C. Cir. 2007); NOS Communications, Inc., Affinity Network Inc. and NOSVA Limited Partnership, EB Docket No , Order to Show Cause and Notice of Opportunity for Hearing, 18 FCC Rcd 6952, , para. 3 (2003); Regulatory Policies Concerning Resale and Shared Use of Common Carrier Services and Facilities, Docket No , Report and Order, 60 FCC 2d 261, 265 para. 8 (1976) ( [A]n entity engaged in the resale of communications service is a common carrier, and is fully subject to the provisions of Title II. ), aff d sub nom. AT&T v. FCC, 572 F.2d 17 (2d Cir. 1978). Further, as the Supreme Court observed in Brand X, the relevant definitions do not distinguish facilities-based and non-facilities-based carriers. Brand X, 545 U.S. at 997. We note that the rules apply not only to facilities-based providers of broadband service but also to resellers of that service. In applying these obligations to resellers, we recognize, as the Commission has in other contexts, that consumers will expect the protections and benefits afforded by providers compliance with the rules, regardless of whether the consumer purchase service from a facilities-based provider or a reseller. See, e.g., Revision of the Commission s Rules to Ensure Compatibility with Enhanced 911 Emergency Calling Systems et al., CC Docket No , IB Docket No , Report and Order and Second Further Notice of Proposed Rulemaking, 18 FCC Rcd 25340, 25380, para. 96 (2003). We note that a reseller s obligation under the rules is independent from the obligation of the facilities-based provider that supplies the underlying service to the reseller, though the extent of compliance by the underlying facilities-based provider will be a factor in assessing compliance by the reseller Open Internet Order, 25 FCC Rcd at 17934, para. 49 & n See 47 U.S.C. 153(34) ( The term mobile station means a radio-communication station capable of being moved and which ordinarily does move. ); Open Internet Order, 25 FCC Rcd at 17934, para We note that public safety services, as defined in section 337 of the Act, are excluded from the definition of mobile broadband Internet access service. See 47 U.S.C. 337(f)(1). 462 We provide these definitions of fixed and mobile for illustrative purposes. In contrast to the Commission s 2010 Open Internet Order, here we are applying the same regulations to both fixed and mobile broadband Internet access services Open Internet Order, 25 FCC Rcd at 17932, para In the 2010 Open Internet Order, the Commission found that mass market included broadband Internet access services purchased with support of the E-rate program. See 2010 Open Internet Order, 25 FCC Rcd at 17932, para. 45. Since that time, the Commission has extended universal service support for broadband services through the (continued.) 83

84 of higher learning purchase mass market services, those institutions would be included within the scope of the schools and libraries portion of our definition. 465 The term mass market does not include enterprise service offerings, which are typically offered to larger organizations through customized or individuallynegotiated arrangements, 466 or special access services We adopt our tentative conclusion in the 2014 Open Internet NPRM that broadband Internet access service does not include virtual private network (VPN) services, content delivery networks (CDNs), hosting or data storage services, or Internet backbone services (to the extent those services are separate from broadband Internet access service). 468 The Commission has historically distinguished these services from mass market services and, as explained in the 2014 Open Internet NPRM, they do not (Continued from previous page) Lifeline and Rural Health Care programs. See Lifeline and Link Up Reform and Modernization; Lifeline and Link Up; Federal-State Joint Board on Universal Service; Advancing Broadband Availability Through Digital Literacy Training, WC Docket Nos , , 12-23, CC Docket No , Report and Order and Further Notice of Proposed Rulemaking, 27 FCC Rcd 6656, 6795, para. 323 (2012) (adopting a Low-Income Broadband Pilot Program... that will focus on testing the necessary amount of subsidies for broadband and the length of support ); Rural Health Care Support Mechanism, WC Docket No , Report and Order, 27 FCC Rcd (2012). Thus, for the same reasons the Commission defined mass market services to include BIAS purchased with the support of the E-rate program in 2010, we now find that mass market also includes BIAS purchased with the support of Lifeline and Rural Health Care programs. 465 See Higher Education and Libraries Comments at 11 (noting that institutions of higher education are not residential customers or small businesses and uncertainty about whether institutions of higher education (and their libraries) are included in the term schools because the term is sometimes interpreted as applying only to K-12 schools). 466 See 2010 Open Internet Order, 25 FCC Rcd at 17932, para. 45; AT&T/BellSouth Merger Order, 22 FCC Rcd at , para. 85 ( [E]nterprise customers tend to be sophisticated and knowledgeable (often with the assistance of consultants),... contracts are typically the result of RFPs and are individually-negotiated (and frequently subject to non-disclosure clauses),... contracts are generally for customized service packages, and... the contracts usually remain in effect for a number of years. ). 467 The Commission has a separate, ongoing proceeding examining special access. See Special Access for Price Cap Local Exchange Carriers; AT&T Corporation Petition for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access Services, WC Docket No , RM-10593, Report and Order and Further Notice of Proposed Rulemaking, 27 FCC Rcd (2012) (Special Access Data Collection Order or Special Access Data Collection NPRM) (initiating special access data collection and seeking comment on a proposal to use the data to evaluate competition in the special access services market); Special Access for Price Cap Local Exchange Carriers; AT&T Corporation Petition for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access Services, WC Docket No , RM-10593, Report and Order, 27 FCC Rcd (2012) (Pricing Flexibility Suspension Order) (suspending, on an interim basis, the Commission s rules allowing the grant of pricing flexibility for special access services in areas subject to price cap regulation and, to identify a replacement framework, detailing a plan to collect data and information for a robust market analysis to gauge actual and potential competition for special access services); Special Access Rates for Price Cap Local Exchange Carriers; AT&T Corp. Petition for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access Services, WC Docket No , RM-10593, Order and Notice of Proposed Rulemaking, 20 FCC Rcd 1994 (2005) (Special Access NPRM) (initiating a broad examination of the regulatory framework to apply to price cap local exchange carrier s interstate special access services); see also Special Access for Price Cap Local Exchange Carriers; AT&T Corporation Petition for Rulemaking to Reform Regulation of Incumbent Local Exchange Carrier Rates for Interstate Special Access Services, WC Docket No , RM-10593, Order on Reconsideration, 29 FCC Rcd (Wireline Comp. Bur. 2014) (finalizing the special access data collection pursuant to delegated authority) Open Internet Order, 25 FCC Rcd at 17933, para. 47; 2014 Open Internet NPRM, 29 FCC Rcd at 5581, para. 58; see also, e.g., Cox Comments at 8, 14; Nokia Comments at

85 provide the capability to receive data from all or substantially all Internet endpoints. 469 We do not disturb that finding here. Likewise, when a user employs, for example, a wireless router or a Wi-Fi hotspot to create a personal Wi-Fi network that is not intentionally offered for the benefit of others, he or she is not providing a broadband Internet access service under our definition We again decline to apply the open Internet rules to premises operators such as coffee shops, bookstores, airlines, private end-user networks (e.g. libraries and universities), and other businesses that acquire broadband Internet access service from a broadband provider to enable patrons to access the Internet from their respective establishments to the extent they may be offering broadband Internet access service as we define it today. 471 We find, as we did in 2010, that a premises operator that purchases BIAS is an end user and that these services are typically offered by the premise operator as an ancillary benefit to patrons. 472 Further, applying the open Internet rules to the provision of broadband service by premises operators would have a dampening effect on these entities ability and incentive to offer these services. As such, we do not apply the open Internet rules adopted today to premises operators. 473 The record evinces no significant disagreement with this analysis Our definition of broadband Internet access service includes services by wire or radio, which encompasses mobile broadband service. Thus, our definition of broadband Internet access service also extends to the same services provided by mobile providers. As discussed above, the record demonstrates the pressing need to apply open Internet rules to fixed and mobile broadband services alike, and changes in the mobile marketplace no longer counsel in favor of treating mobile differently under the rules. 475 Thus, we apply the open Internet rules adopted today to both fixed and mobile networks As we discuss more fully below, broadband Internet access service encompasses the exchange of Internet traffic by an edge provider or an intermediary with the broadband provider s network. 477 Below, we find that broadband Internet access service is a telecommunications service, Open Internet NPRM, 29 FCC Rcd , para. 58; 2010 Open Internet Order, 25 FCC Rcd at 17933, para. 47 ( These services typically are not mass market services and/or do not provide the capability to transmit data to and receive data from all or substantially all Internet endpoints. ); see also Verizon Comments at Open Internet Order, 25 FCC Rcd at 17936, para. 52, n.164 ( We also do not include within the rules free access to individuals wireless networks, even if those networks are intentionally made available to others. ). 471 See id. at 17935, para. 52. While we decline to apply open Internet rules to premises operators to the extent they may offer broadband Internet access service, that decision does not affect other obligations that may apply to premises operators under the Act. See, e.g., 47 U.S.C. 333; Warning: Wi-Fi Blocking is Prohibited, Public Notice, DA (Enforcement Bur. Jan. 27, 2015); Marriott Int l, Inc.; Marriott Hotel Servs, Inc., EB-IHD , Order and Consent Decree, 29 FCC Rcd (Enforcement Bur. 2014) Open Internet Order, 25 FCC Rcd at , para. 52, n We reiterate the guidance in the 2010 Open Internet Order that although not bound by our rules, we encourage premises operators to disclose relevant restrictions on broadband service they make available to their patrons. See id. 474 CDT Comments at 26 n.61; Higher Education and Libraries Reply at We note, however, that this exception does not affect other obligations that a premise operator may have independent of our open Internet rules. See TDI Comments at (arguing that the enterprise or premise operator exception should not apply to blocking or prioritization undertaken in violation of disability law). 475 See supra Section III.B Although we adopt the same rules for both fixed and mobile services, we recognize that with respect to the reasonable network management exception, the rule may apply differently to fixed and mobile broadband providers. See infra Section III.D See infra Section III.D.2. 85

86 subject to sections 201, 202, and 208 (along with key enforcement provisions). 478 As a result, the Commission will be available to hear disputes regarding arrangements for the exchange of traffic with a broadband Internet access provider raised under sections 201 and 202 on a case-by-case basis: an appropriate vehicle for enforcement where disputes are primarily over commercial terms and that involve some very large corporations, including companies like transit providers and CDNs, that act on behalf of smaller edge providers. However, for reasons discussed more fully below, 479 we exclude this portion of broadband Internet access service interconnection with a broadband Internet access service provider s network from application of our open Internet rules. We note that this exclusion also extends to interconnection with CDNs Internet Traffic Exchange 194. In the 2010 Open Internet Order, the Commission applied its open Internet rules only as far as the limits of a broadband provider s control over the transmission of data to or from its broadband customers, and excluded the exchange of traffic between networks from the scope of the rules. 481 In the 2014 Open Internet NPRM, the Commission tentatively concluded that it should maintain this approach, but explicitly sought comment on suggestions that the Commission should expand the scope of the open Internet rules to cover issues related to Internet traffic exchange As discussed below, we classify fixed and mobile broadband Internet access service as telecommunications services. 483 The definition for broadband Internet access service includes the exchange of Internet traffic by an edge provider or an intermediary with the broadband provider s network. We note that anticompetitive and discriminatory practices in this portion of broadband Internet access service can have a deleterious effect on the open Internet, 484 and therefore retain targeted authority to protect against such practices through sections 201, 202, and 208 of the Act (and related enforcement 478 See infra Sections IV-V. We note that broadband Internet access services are also subject to sections 222, 224, 225, 254, and See infra paras Letter from Scott Blake Harris, Counsel to Akamai Technologies, Inc. to Marlene H. Dortch, Secretary, FCC, GN Docket No , at 1 (filed Feb. 9, 2015) ( Akamai agrees with [the tentative conclusion not to apply the open Internet rules to CDNs] and submits that it should be adopted in the final order. ) Open Internet Order, 25 FCC Rcd at 17993, para. 47 n.150, 17944, para. 67 n.209; see also id. at para. 47 (excluding content delivery network services and Internet backbone services (if those services are separate from broadband Internet access) from the definition of broadband Internet access service ) Open Internet NPRM, 29 FCC Rcd at 5582, , paras. 59, As a general matter, Internet traffic exchange involves the exchange of IP traffic between networks. An Internet traffic exchange arrangement determines which networks exchange traffic and the destinations to which those networks will deliver that traffic. In aggregate, Internet traffic exchange arrangements allow an end user of the Internet to interact with other end users on other Internet networks, including content or services that make themselves available by having a public IP address, similar to how the global public switched telephone network consists of networks that route calls based on telephone numbers. When we adopted the 2014 Open Internet NPRM, the Chairman issued a separate, written statement suggesting that the question of interconnection ( peering ) between the consumer s network provider and the various networks that deliver to that ISP... is a different matter that is better addressed separately Open Internet NPRM, 29 FCC Rcd at While this statement reflected the Notice s tentative conclusion concerning Internet traffic exchange, it in no way detracts from the fact that the Notice also sought comment on whether we should change our conclusion, whether to adopt proposals to expand the scope of the open Internet rules to cover issues related to traffic exchange, and how to ensure that a broadband provider would not be able to evade our open Internet rules by engaging in traffic exchange practices that would be outside the scope of the rules as proposed. Id. at 5582, para See infra Section IV. 484 See infra para

87 provisions), but will forbear from a majority of the other provisions of the Act. 485 Thus, we conclude that, at this time, application of the no-unreasonable interference/disadvantage standard and the prohibitions on blocking, throttling, and paid prioritization to the Internet traffic exchange arrangements is not warranted Trends in Internet Traffic Exchange. Internet traffic exchange is typically based on commercial negotiations. 486 Changes in consumer behavior, traffic volume, and traffic composition have resulted in new business models for interconnection. Since broadband Internet access service providers cannot, on their own, connect to every end point on the Internet in order to provide full Internet access to their customers, they historically paid third-party backbone service providers for transit. Backbone service providers interconnected upstream until traffic reached Tier 1 backbone service providers, which peered with each other and thereby provided their customer networks with access to the full Internet. 487 In this hierarchical arrangement of networks, broadband Internet access providers negotiated with backbone service providers; broadband Internet access providers generally did not negotiate with edge providers to gain access to content. 488 However, in recent years, new business models of Internet traffic exchange have emerged, premised on changes in traffic flows and in broadband Internet access provider networks. 489 A number of factors drive these trends in Internet traffic exchange Critically, the growth of online streaming video services has sparked further evolution of the Internet. 490 Content providers have come to rely on the services of commercial and private CDNs, which cache content close to end users, providing increased quality of service and avoiding transit 485 See infra Section V. 486 See, e.g., Verizon Reply at 57; CenturyLink Reply at William Norton, The Evolution of the U.S. Internet Peering Ecosystem, Dr. Peering, (last visited Feb. 5, 2015). 488 Id. 489 See, e.g., Verizon Reply at 58 (explaining that new arrangements [are] emerging on a regular basis to provide for efficient network planning and traffic delivery, as well as improved service for customers as their demands for Internet services continues to grow ); AT&T Reply at 96 ( For more than two decades, such interconnection has taken the form of transit and peering agreements, and in recent years, on-net-only agreements have arisen in response to growing demands for video and other forms of media-rich content. ); see also Werbach, Kevin D., The Centripetal Network: How the Internet Holds Itself Together, and the Forces Tearing it Apart (2009), 42 U.C. Davis L. Rev., 343, 371 (2009), (anticipating the evolving interconnection ecosystem). 490 See 2015 Broadband Progress Report at para. 32 ( Consumers increasingly are choosing higher quality video services that demand increased bandwidth, and projections show new video service options and substantial growth in this area. ). Currently, video is the dominant form of traffic on the Internet, with estimates that traffic from Netflix and YouTube constitutes approximately 50 percent of peak Internet download traffic. Sandvine Report: Netflix and Youtube Account for 50% of All North American Fixed Network Data, Sandvine (Nov. 11, 2013), (stating also that video is very asymmetric and requires significant bandwidth). For instance, Netflix recommends a connection speed of at least 5 Mbps to watch its content in HD, while Google has reported that at least 2.5 Mbps is needed to sustain an average YouTube HD video playback at 720p resolution. Netflix, Internet Connection Speed Recommendations, (last visited Mar. 3, 2015); see also Google Apps Administrator, Bandwidth Limits, (last visited Jan. 5, 2015). Many project continued growth of online streaming video services on both fixed and mobile platforms. See, e.g., Letter from Jared Carlson, Director, Government Affairs and Public Policy, Ericsson, to Marlene H. Dortch, Secretary, FCC, GN Docket Nos and (filed Oct. 16, 2014), Attach. Ericsson Mobility Report (June 2014) at 13 (stating that in 2013, video accounted for approximately 40% of mobile data traffic, and is projected to account for more than 50% of mobile data traffic by 2019); Cisco Visual Networking Index (June 2014), (finding that globally, IP video traffic will be 79 percent of all consumer Internet traffic in 2018, up from 66 percent in 2013). 87

88 costs. 491 While CDNs rely on transit to feed the array of CDN cache servers, they deliver traffic to broadband Internet access service providers via transit service or by entering into peering arrangements, directly interconnecting with broadband Internet access service providers In addition, several large broadband Internet access service providers, such as AT&T, Comcast, Time Warner Cable, and Verizon, have built or purchased their own backbones, giving them the ability to directly interconnect with other networks and edge providers and thereby lowering and eliminating payments to third-party transit providers. These interconnection arrangements are peering, involving the exchange of traffic only between the two networks and their customers, rather than paid transit, which provides access to the full Internet over a single interconnection. 493 Peering gives the participants greater control over their traffic 494 and any issues arising with the traffic exchange are limited to those parties, and not other parties over other interconnection links. Historically, broadband Internet access service providers paid for transit and therefore had an incentive to agree to settlement-free peering with a CDN to reduce transit costs; 495 however, where large broadband Internet access service providers have their own national backbones and have settlement-free peering with other backbones, they may no longer have an incentive to agree to settlement-free peering with CDNs in order to avoid transit costs. As shown below in Chart 1, the evolution from reliance on transit to peering arrangements also means an evolution from a traffic exchange arrangement that provides access to the full Internet to a traffic exchange arrangement that only provides for the exchange of traffic from a specific network provider and its customers See, e.g., Akamai Comments at 4 ( At any given time Akamai delivers between 15-30% of all web traffic, resulting in over two trillion interactions delivered daily. ). 492 See, e.g., Netflix, Netflix Open Connect, (last visited Jan. 5, 2015); Google Peering & Content Delivery, Google Caching Overview, (last visited Jan. 5, 2015). 493 Joint Application of Time Warner Cable and Comcast Corp., MB Docket 14-57, at 36 (filed April 8, 2014) ( Comcast and TWC have independently developed their own national core backbone infrastructure. ); Verizon/MCI Merger Order, 20 FCC Rcd at 18495, para. 116 ( Based on the record evidence, we find that there likely are between six and eight Tier 1 Internet backbone providers based on the definition of Tier 1 backbones that has been used in the past: AT&T, MCI, Sprint, Level 3, Qwest, Global Crossing, and likely SAVVIS and Cogent. ). 494 See William Norton, The Evolution of the U.S. Internet Peering Ecosystem, Dr. Peering, ( Peering has the benefit of lower latency, better control over routing, and may therefore lead to lower packet loss. ). 495 See, e.g., Verizon Reply at 58 ( In fact, today the majority of traffic destined for our end-user subscribers is delivered to Verizon over paid, direct connections with CDNs and large content providers, not over connections with our traditional, settlement-free peering partners. ); Body of European Regulators for Electronic Communications, An Assessment of IP Interconnection in the Context of Net Neutrality at 47 (Dec. 6, 2012), (BEREC Report); Netflix Petition to Deny, MB Docket No.14-57, Attach. A at 3 (Ken Florance states, CDNs also can reduce the transit costs paid by terminating access networks (where such networks pay for transit), because more content is stored within or near the terminating access network and so does not need to be retrieved remotely. ). 496 J. Scott Marcus, The Economic Impact of Internet Traffic Growth on Network Operators at 4, WIK-Consult (Oct. 24, 2014), ( Very few ISPs are able, however, to use peering to reach all Internet destinations. Even well-connected ISPs typically purchase transit from one or two other ISPs in order to reach destinations that are not covered by their own peering arrangements. ) (emphasis in original). 88

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